Estimating Depreciation - Estimating Accrued Depreciation

4 important questions on Estimating Depreciation - Estimating Accrued Depreciation

What are the two general methods for estimating accrued depreciation?

  1. Lump-sum age/life method - based on the overal relation between age and depreciation.
  2. Breakdown method - separate estimates for each sub-group depreciation value.

What is an disequilibrium condition in the market?

An imbalance between demand and supply, meaning the cost to produce will not equal the market value

What is the MCF ratio

Market Conditions Factor - the relationship between the selling price to the reproduction cost of the property's improvements, adjusted for accrued depreciation. The formula is:
MCF = Selling price of the improvement / Reproduction cost less other accrued depreciation
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What is the difference between curable and incurable depreciation?

If a cure will be repaired with the result that the new market value is greater or equal to the costs of the cure it is called curable depreciation. If the cost of the cure are greater than the increase in market value it is called incurable.

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