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accrued depreciation

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accrued depreciation

The total depreciation claimed, to date, on a property. It is an entry on the balance sheet and is supposed to properly reflect that the property is becoming less valuable with the passage of time.Realistically,in the case of real estate,the property is usually becoming more valuable each year.As a result,you may have a book value of $200,000 but a fair market value of $2,000,000.



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The approach is especially persuasive when land value is well supported and the improvements are new or suffer only minor accrued depreciation and, therefore, represent a use that approximates the highest and best use of the land as though vacant.
Thomas Holderness, "A New Look at Accrued Depreciation," The Real Estate Appraiser and Analyst (Fall 1988): 12-14.
Purchase price $14,000,000 Less estimated land value - (1,900,000) Building residual $12,100,000 Replacement cost $27,200,000 Less building residual -(12,100,000) Indicated depreciation $15,100,000 Accrued depreciation percent Depreciation/RCN = 15,100,000/27,200,000 = 0.
 
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