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 $270,000 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 ܢܕ ܢܝ Hours Used 3,100 1,100 1,200 2,800 2,600 1,200 ܧ ܩ ܗ Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.) Answer is complete but not entirely correct. Year Den 1 2 - 3 4 5 UNIVERSITY CAR WASH Depreciation Schedule—Straight-Line End of year amounts Depreciation Accumulated Book Value Expense Depreciation 246,000 X $ 41,000 $ 239,000 X 246,000 X 82,000 188,000 246,000 X 123,000 147,000 246,000 X 164,000 106,000 246,000 X 205,000 65,000 246,000 246,000 24,000 $ 1,476,000 Total

Answer 1

straight line method
year	depreciation expense	accumulated depreciation	book value
1	41,000	41,000	2,29,000
2	41,000	82,000	1,88,000
3	41,000	1,23,000	1,47,000
4	41,000	1,64,000	1,06,000
5	41,000	2,05,000	65,000
6	41,000	2,46,000	24,000

Depreciation = cost – residual value / useful life

= 270,000 – 24,000 / 6

= 41,000 per year

double decline balance method
year	beginning book value	depreciation rate	Depreciation expense	accumulated depreciation	book value
1	2,70,000	33.33%	89,991	89,991	1,80,009
2	1,80,009	33.33%	59,997	1,49,988	1,20,012
3	1,20,012	33.33%	40,000	1,89,988	80,012
4	80,012	33.33%	26,668	2,16,656	53,344
5	53,344	33.33%	17,780	2,34,436	35,564
6	35,564	33.33%	11,853	2,46,289	23,711

Depreciation rate = 100 / useful life x 2

= 100 / 6 x 2

= 33.33%

activity based method
year	hour used	depreciation rate	depreciation expense	accumulated depreciation	book value
1	3,100	20.5	63,550	63,550	2,06,450
2	1,100	20.5	22,550	86,100	1,83,900
3	1,200	20.5	24,600	1,10,700	1,59,300
4	2,800	20.5	57,400	1,68,100	1,01,900
5	2,600	20.5	53,300	2,21,400	48,600
6	1,200	20.5	24,600	2,46,000	24,000

Depreciation rate = cost – residual value / total hours

= 270,000 – 24,000 / 12,000

= 20.5 per hour