Question

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $246,000 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

2. Prepare a depreciation schedule for six years using the double-declining-balance method.

Answer 1

Answer-2)-

Depreciation Schedule-Double Declining Balance Method
YEAR	COST $	Depreciation Rate	Depreciation $	Accumulated Depreciation $	Book Value $
1	246000	33.33%	81992	81992	164008
2		33.33%	54664	136656	109344
3		33.33%	36444	173100	72900
4		33.33%	24298	197398	48602
5		33.33%	16199	213597	32403
6		33.33%	5403	219000	27000

Explanation- Double Declining balance depreciation is calculated using the following formula:

Depreciation = Depreciation Rate * Book Value of Asset

Depreciation rate is given by the following formula:

Depreciation Rate = Accelerator *Straight Line Rate

Straight-line Depreciation Rate = 1/6 = 0.1667 = 16.67%
Declining Balance Rate = 2*16.67% = 33.33%