Question

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 1 2 3 4 5 6 Hours Used 2,700 2,000 2,100 1,900 1,700 2,100 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.) Year UNIVERSITY CAR WASH Depreciation Schedule-Straight-Line End of year amounts Depreciation Accumulated Expense Book Value Depreciation $ 90,072 $ 90,072 $ 146,928 66,720 156,792 80,208 51.700 208,500 28,500 1 2 3 4

Answer 1

Given that:

Original Cost of machine. = $237,000

Salvage value at the end of life = $28,500

Life of machine. =   6 years

Depeeciation Using straight line method

SLM = (Cost of machine - Salvage value)/Life

Depreciation =( $237,000 - $28,500)/6years

Depreciaton each year = $34,750

Depreciation schedule:

Years	Deprecaition Expenses $	Accumulative depn $	Book value $
1	34,750	34,750	202,250
2	34,750	69,500	167,500
3	34,750	104,250	132,750
4	34,750	139,000	98,000
5	34,750	173,150	63,250
6	34,750	208,500	28,500

Note:

Total Hours given in question 12500 hours, has no relevance for calculating depreciation under the straight line method, However it will be relevant for calculating depreciation under unit of production method