Appraiser John is evaluating a 1,200-square-foot log cabin, whose owner is refinancing. He determines that the cost to replace the building would be $80 per square foot. He estimates the depreciation of the cabin to be 20% and the value of the land to be $48,000. What is John's estimate of value?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Appraiser John is evaluating a 1,200-square-foot log cabin, whose owner is refinancing. He determines that the cost to replace the building would be $80 per square foot. He estimates the
$124,800
$148,800
$163,200
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