Question

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Required information The following information applies to the questions displayed below.) University Car Wash built a deluxe car wash across the street from campus. The new machines cost $267.000 including installation. The company estimates that the equipment will have a residual value of $24,000. 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 3,000 1,200 1.300 2,700 2.500 1,300 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.) UNIVERSITY CAR WASH Depreciation Schedule-Straight-Line End of year amounts Depreciation Accumulated Book Value Expense Depreciation Year

Answer 1

Summary data given: 1 Machine cost 2,67,000 Salvage value 24 000 Years 6 Years Actual hrs used 11 3000 21 1200l 31 1300 4 2700l 5 25001 6 13001 12000 1 Depreciation expense under SLM UNIVERSITY CAR WASH DEPRECIATION SCHEDULE - STRAIGHT LINE END OF YEAR AMOUNTS | Year Depreciation expeses Accoumulated Dep_ 11 40,500 40,500 2 4 0,500 8 1,000 3 4 0,500 1,21,500 4 4 0,500 1,62,000 5 4 0,500 2,02,500 6 4 0,500 2,43,000 TOTAL 2,43,000 Book value 2,26,500 1,86,000 1,45,500 1,05,000 64.500 24,000 WORKINGS: Machine cost Salvage value Net depreciable amount Useful life 1 Annual depreciation 1 2,67,000 24,000 2,43,000 (a) 6 (6) 4 0,500 C = (a/b))

2 Depreciation expense under double declining method: Year 2 UNIVERSITY CAR WASH DEPRECIATION SCHEDULE - Double declining balance END OF YEAR AMOUNTS Depreciation expeses Accoumulated Dep 89,000 89,000 5 9,333 1,48,333 3 39,556 1 ,87,889 4 26,370 2,14,259 17,580 2,31,840 61 1 1.160 2,43,000 2,43,000 L Book value 1,78,000 1,18,667 79,111 52,741 35,160 24,000 TOTAL Note: In 6th year, actual depreciation is 11,720 but it is mentioned as 11,160 to retain salvage value as 24,000. Calcualtion of depreciation rate in double declining method: -100%/6 1=16.666796 Normal depreciation rate Double depreciation rate per annum =33.3333395 The double depreciation rate is multiplied into end of book value for each year

3 Depreciation expense under activity based method: Year UNIVERSITY CAR WASH DEPRECIATION SCHEDULE - Activity based END OF YEAR AMOUNTS Depreciation expeses Accoumulated Dep 60,750 6 0,750 24,300 85,050 26,325 1,11,375 54,675 1,66,050 50,625 2,16,675 61 26,325 2,43,000 2,43,000 21 Book value 2,06,250 1,81.950 1,55,625 1,00,950 50.325 24,000 TOTAL Depreciable book value 2 ,43,000 a) Year Hours usage 2 1 3000 200 1300 2700 2500 1300 12000 Depreciation percer Depreciation amount 25.0095 60,750.00 Depreciaiton percentage into depreciable book value 10.00 24,300.00 10.8396 26,325.00 22.5096 54,675.00 20.8396 50,625.00 10.8396 26,325.00 2,43,000.00