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

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

Depreciation rate per hour = (Cost - Salvage value) /Life in hours

= (246,000-27,000)/12,000 = 18.25

1 (2800*18.25)	51100
2 (1900*18.25)	34675
3 (2000*18.25)	36500
4 (2000*18.25)	36500
5 (1800*18.25)	32850
6 (1500*18.25)	27375