An appraiser in Orange County, California is calculating physical deterioration using the age-life method. The home has an actual age of 25 years but an effective age of 15 years due to extensive renovations. The total economic life is estimated at 75 years. The replacement cost new of the improvements is $720,000. What is the accrued physical depreciation?
Correct Answer
B) $144,000
Step 1: In the age-life method, effective age is used, not actual age. Step 2: Depreciation rate = Effective Age / Total Economic Life = 15/75 = 20%. Step 3: Accrued depreciation = $720,000 × 20% = $144,000.
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In the cost approach to valuation in California, all of the following are examples of external (economic) obsolescence EXCEPT:
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