Question

Required information Problem 7-5A Determine depreciation under three methods (LO7-4) (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 $225,000 including installation. The company estimates that the equipment will have a residual value of $22,500. 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 3,100 1,600 1,700 2,300 2,100 1,700 Problem 7-5A Part 1 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 Expense Depreciation Book Value Year Total $

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer e Part 1) UI O 000 University car wash Depreciation Schduele Straight Line End of Year Amounts Depreciation expense Accumulated Depreciation 33750 33750 33750 67500 33750 101250 33750 135000 33750 168750 33750 202500 202500 Book Value 191250 157500 123750 90000 56250 22500 6 Totals 3 5 Straight linedepreciation expense = (cost - salvage) / life 6 = (225000-22500) / 6 7 = $ 33750 v o

9 Part 2) Year 1 oO00 VOU AWN = O University car wash Depreciation Schduele Double declining End of Year Amounts Depreciation expense Accumulated Depreciation 75000 75000 50000 125000 33333 158333 22222 180555 14815 195370 7130 202500 202500 3 Book Value 150000 100000 66667 44445 29630 22500 5 6 Totals 2 Formula 3 = net book value * double decling depreciation rate 5 Double decling rate 6 = 1/n*2*100 7 = 1/6*2*100 8 = 33.33333%

o Part 3) Year i my 1090 2 University car wash Depreciation Schduele Activity Based End of Year Amounts Depreciation expense | Accumulated Depreciation 50220 50220 25920 76140 27540 103680 37260 140940 34020 174960 27540 202500 202500 3 Book Value 174780 148860 121320 84060 50040 22500 5 1 Totals 3 Formula 4 Depreciation expense under unit of production 5 = (cost-salvage) / total hours * respective hours