Question

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 $237,000 including installation. The company estimates that the equipment will have a residual value of $28,500. University Car Wash also estimates it will use the machine for six years or about 12,500 total hours. Actual use per year was as follows: Year Hours Used 2,700 2,000 2,100 1,900 1,700 2,100 1 3 5 6 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.) UNIVERSITY CAR WASH Depreciation Schedule-Activity Based

Answer 1

Depreciation expense per hour = ( Cost of machine - Residual value)/Estimated hours

= ( 237,000-28,500)/12,500

= 208,500/12,500

= $16.68

UNIVERSITY CAR WASH
Depreciation Schedule - Activity Based
End of year amounts
Year	Depreciation Expense	Accumulated Depreciation	Book Value
1	2,700 x 16.68 = 45,036	45,036	237,000-45,036 = 191,964
2	2,000 x 16.68 = 33,360	45,036+33,360 = 78,396	237,000-78,396 = 158,604
3	2,100 x 16.68 = 35,028	78,396+35,028 = 113,424	237,000-113,424 = 123,576
4	1,900 x 16.68 = 31,692	113,424+31,692 = 145,116	237,000-145,116 = 91,884
5	1,700 x 16.68 = 28,356	145,116 + 28,356=173,472	237,000-173,472 = 63,356
6	2,100 x 16.68 = 35,028	173,472+35,028 = 208,500	237,000-208,500 = 28,500
Totals	$208,500

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