Reproduction cost is $420,000 and replacement cost is $365,000. Using replacement cost, with accrued depreciation of $73,000 and a site valued at $110,000, what value does the cost approach indicate?
Correct Answer
B) $402,000
Why this is correct: the depreciation given was measured against replacement cost, so replacement cost is the figure it comes off. Calculation: $365,000 - $73,000 + $110,000 = $402,000. Why the other choices are wrong: $457,000 uses reproduction cost, which carries superadequacies that the depreciation figure never accounted for; $292,000 omits the site; $512,000 omits the depreciation.
Why This Is the Correct Answer
Why this is correct: the depreciation given was measured against replacement cost, so replacement cost is the figure it comes off. Calculation: $365,000 - $73,000 + $110,000 = $402,000. Why the other choices are wrong: $457,000 uses reproduction cost, which carries superadequacies that the depreciation figure never accounted for; $292,000 omits the site; $512,000 omits the depreciation.
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A 15-year-old house has cost new of $420,000 with short-lived items totaling $58,000 in cost and $24,000 of depreciation charged against them. If the long-lived ratio is 18%, total physical depreciation is:
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With an effective age of 15 and total economic life of 60, what is the remaining economic life?
