An appraiser determining the accrued depreciation of a property is using which approach to value?

• A. Sales comparison approach
• B. Income approach
• C. Market approach
• D. Cost approach

Answer: (D)

Verified step by step guidance

1. Understand the concept of accrued depreciation: Accrued depreciation refers to the loss in value of a property due to physical wear and tear, functional obsolescence, or external factors over time.
2. Learn about the cost approach: The cost approach is a valuation method that estimates the value of a property by determining the cost to replace or reproduce the property, minus accrued depreciation, plus the value of the land.
3. Recognize why the cost approach is used for accrued depreciation: This method explicitly accounts for depreciation by subtracting it from the replacement or reproduction cost, making it the most suitable approach for determining accrued depreciation.
4. Compare the cost approach to other valuation methods: The sales comparison approach and income approach focus on market data and income generation, respectively, and do not directly calculate depreciation as part of their process.
5. Conclude that the cost approach is the correct method for determining accrued depreciation, as it directly incorporates depreciation into the valuation calculation.