If a building has a current reproduction cost of $50,000, an effective age of 20 years, and an economic life of 50 years, what would its value be after depreciation?

To determine the value of the building after depreciation, the concept of straight-line depreciation is applied. This method assumes that the property will lose value evenly over its economic life.

First, you need to establish the building's depreciation rate. The effective age of the building is 20 years, and its total economic life is 50 years. To find the annual depreciation, you would divide the current reproduction cost by the economic life:

Annual Depreciation = Current Reproduction Cost / Economic Life

Annual Depreciation = $50,000 / 50 years = $1,000 per year.

Next, you need to determine the total depreciation for the building based on its effective age:

Total Depreciation = Annual Depreciation × Effective Age

Total Depreciation = $1,000 × 20 years = $20,000.

Finally, the value of the building after depreciation is found by subtracting the total depreciation from the current reproduction cost:

Value after Depreciation = Current Reproduction Cost - Total Depreciation

Value after Depreciation = $50,000 - $20,000 = $30,000.

Thus, the value of the building after accounting for depreciation is indeed $30,000. This calculation effectively