Total economic life differs from remaining economic life in that total economic life:
Correct Answer
D) Spans the full period the improvements contribute value
Why this is correct: Total economic life (TEL) is the entire estimated period, from when the improvements are new until they no longer contribute to property value. Remaining economic life (REL) is the portion of that period that is still left, given the building's current condition and market. Why the other choices are wrong: "Is set by the property's mortgage term" is incorrect; economic life is based on utility and market, not financing. "Measures only the years still ahead" defines remaining economic life, not total. "Equals the building's total physical durability in years" confuses economic life (value contribution) with physical life (structural soundness). Exam tip: The three age-life terms are related: Total Economic Life = Effective Age + Remaining Economic Life.
Why This Is the Correct Answer
Why this is correct: Total economic life (TEL) is the entire estimated period, from when the improvements are new until they no longer contribute to property value. Remaining economic life (REL) is the portion of that period that is still left, given the building's current condition and market. Why the other choices are wrong: "Is set by the property's mortgage term" is incorrect; economic life is based on utility and market, not financing. "Measures only the years still ahead" defines remaining economic life, not total. "Equals the building's total physical durability in years" confuses economic life (value contribution) with physical life (structural soundness). Exam tip: The three age-life terms are related: Total Economic Life = Effective Age + Remaining Economic Life.
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Previous Question
An appraiser is estimating depreciation for a retail strip center using the age-life method. She determines the building’s total economic life is 40 years and its effective age is 18 years. The reproduction cost new (RCN) is $2,400,000. What is the amount of accrued depreciation?
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The unit-in-place method estimates cost by: