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Cost ApproachHARD13.6% of exam

A dwelling is 30 years old but has been fully renovated and presents as though it were 10 years old. Total economic life is 55 years and cost new is $340,000. What is the accrued depreciation?

Correct Answer

A) $61,818

Why this is correct: renovation resets effective age, which is the figure the age-life method uses. Calculation: 10 / 55 x $340,000 = $61,818. Why the other choices are wrong: $185,455 uses the 30-year actual age and charges the property for a renovation it received; $30,909 uses five years; $113,333 divides cost new by three, which follows from nothing in the stem.

Answer Options
A
$61,818
B
$113,333
C
$30,909
D
$185,455

Why This Is the Correct Answer

Why this is correct: renovation resets effective age, which is the figure the age-life method uses. Calculation: 10 / 55 x $340,000 = $61,818. Why the other choices are wrong: $185,455 uses the 30-year actual age and charges the property for a renovation it received; $30,909 uses five years; $113,333 divides cost new by three, which follows from nothing in the stem.

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