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Cost ApproachMEDIUM13.6% of exam

Cost new of the improvements is $310,000. The dwelling has an actual age of 15 years, an effective age of 12 years, and a total economic life of 60 years. Using the age-life method, what is the accrued depreciation?

Correct Answer

C) $62,000

Why this is correct: the age-life method uses effective age, which is what the market sees, rather than the number of years since construction. Calculation: 12 / 60 = 20%; $310,000 x 0.20 = $62,000. Why the other choices are wrong: $77,500 uses the 15-year actual age, ignoring the maintenance that made the property present as younger; $248,000 is the remaining value rather than the depreciation; $51,667 divides by 72 years, which is neither figure given.

Answer Options
A
$248,000
B
$51,667
C
$62,000
D
$77,500

Why This Is the Correct Answer

Why this is correct: the age-life method uses effective age, which is what the market sees, rather than the number of years since construction. Calculation: 12 / 60 = 20%; $310,000 x 0.20 = $62,000. Why the other choices are wrong: $77,500 uses the 15-year actual age, ignoring the maintenance that made the property present as younger; $248,000 is the remaining value rather than the depreciation; $51,667 divides by 72 years, which is neither figure given.

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