Question

Which value is subtracted from the replacement cost value of a specific piece of property to determine its actual cash value?

Option 1: Actual cash value is determined by subtracting which value from the replacement cost value of a specific peice of property?
Option 2: Market value
Option 3: Salvage value
Option 4: Insurance premium

Answer 1

Depreciation is subtracted from the replacement cost to find the actual cash value of a property. This accounts for the property's age, wear and tear, or obsolescence.

Step-by-step explanation:

The value subtracted from the replacement cost value of a specific piece of property to determine its actual cash value is the property's depreciation. The actual cash value is calculated by taking the replacement cost of the item and subtracting the depreciation, which accounts for the wear and tear, age, or obsolescence of the property. Option 2 (Market value), Option 3 (Salvage value), and Option 4 (Insurance premium) are not the correct values used to determine actual cash value in this context.