The driveway and walks cost $18,000 new, have an effective age of 8 years and a total life of 20 years. What is their depreciated contribution?
Correct Answer
A) $10,800
Why this is correct: site improvements depreciate on their own shorter life, not the dwelling’s. Calculation: 8 / 20 = 40% depreciated, so 60% remains; $18,000 x 0.60 = $10,800. Why the other choices are wrong: $7,200 is the depreciation rather than what remains; $14,400 applies a 40-year life, which a driveway does not have; $18,000 treats eight-year-old paving as new.
Why This Is the Correct Answer
Why this is correct: site improvements depreciate on their own shorter life, not the dwelling’s. Calculation: 8 / 20 = 40% depreciated, so 60% remains; $18,000 x 0.60 = $10,800. Why the other choices are wrong: $7,200 is the depreciation rather than what remains; $14,400 applies a 40-year life, which a driveway does not have; $18,000 treats eight-year-old paving as new.
More Cost Approach Questions
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