In the cost method formula MV = S + RCN - D, what does D represent?

In the cost method formula MV = S + RCN - D, what does D represent?

• A. Replacement cost
• B. Market value of site
• C. Accumulated depreciation
• D. Market value of property

Answer: (C)

In the cost method, value is found by taking the site value and adding the replacement cost new of the improvements, then subtracting depreciation that has accumulated over time. The D in this formula represents accumulated depreciation—the total loss in value since the property was new due to wear, age, obsolescence, and other factors. It’s not replacement cost, nor is it the market value of the site or the market value of the property as a whole. For example, with a site value of 50,000, replacement cost new of 200,000, and accumulated depreciation of 40,000, the market value would be 210,000.

In the cost method, value is found by taking the site value and adding the replacement cost new of the improvements, then subtracting depreciation that has accumulated over time. The D in this formula represents accumulated depreciation—the total loss in value since the property was new due to wear, age, obsolescence, and other factors. It’s not replacement cost, nor is it the market value of the site or the market value of the property as a whole. For example, with a site value of 50,000, replacement cost new of 200,000, and accumulated depreciation of 40,000, the market value would be 210,000.