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 2 2 3 4 5 6 Hours Used 2,700 2,000 2,100 1,900 1,700 2,100 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 End of year amounts Depreciation Accumulated Expense Depreciation Book Value Year 1 2 3 4

Answer 1

Depreciation per machine hour is = (Cost-Residual value)/Estimated machine hours Depreciation per machine hour is = (237000-28500)/12500 Depreciation per machine hour is = $ 16.68/. Depreciation expense for each year is = Hours used in each year * Depreciation per machine hour Book Value Depreciation schedule :- Beginning Depreciation Accumulated Year balance Expense depreciation 1 2,37,000 45,036 45,036 1,91,964 33,360 78,396 3 1,58,604 35,028 1,13,424 4 1,23,576 31,692 1,45,116 5 91,884 28,356 1,73,472 6 63,528 35,028 2,08,500 N 1,91,964 1,58,604 1,23,576 91,884 63,528 28,500 6