Question

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $234,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows:

Year	Hours Used
1	2,800
2	1,900
3	2,000
4	2,000
5	1,800
6	1,500

Required:

1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
  

2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)

3. Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.)

Answer 1

Cost of the Machine 234000 Less: salvage Value 27000 Depreciatble Value 207000 Estmated Life 12000 Units Straight Line Method Annual Depreciation : Depreciable Value / Life Depreciation Per annuam : 207000/6 34500 Depreciation Accumulated Year Expenses Depreciation Book Value At Acquisition 234000 1 34500 34500 199500 34500 69000 165000 34500 103500 130500 34500 138000 96000 34500 172500 61500 34500 207000 27000 Total 207000

Double Decline Method Annual Depreciation : 1/Life *2 Depreciation Rate :(1/6)*2 Depreciation Expenses Accumulated Book value @33% Depreciation Bookvale 234000 78000 78000 156000 156000 52000 130000 104000 104000 34667 164667 69333 69333 23111 187778 46222 46222 15407 203185 30815 30815 3815 207000 270001 Depreciation Accumulated Year Expenses Depreciation Book Value 78000 78000 156000 52000 130000 104000 34667 164667 69333 23111 187778 46222 15407 203185 30815 3815 207000 27000 Total 207000

1 u WN Activity Based Method Annual Depreciation : Depreciable Value / Life Depreciation Per unit : 207000/12000 17.25 Year Units Rate Depreciation 2800 17.25 48300 1900 17.25 32775 2000 17.25 34500 2000 17.25 34500 1800 17.25 31050 1500 17.25 25875 Depreciation Accumulated Year Expenses Depreciation Book Value 48300 48300 32775 81075 152925 34500 115575 118425 34500 150075 83925 31050 181125 52875 25875 207000 27000 Total 207000 185700