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 ол Фш ме Hours Used 3,100 1,100 1,200 2,800 2,600 1,200 2. Prepare a depreciation schedule for six years using the double-declining- balance method. (Do not round your intermediate calculations.) UNIVERSITY CAR WASH Depreciation Schedule-Double-Declining-Balance End of year amounts Year Depreciation De Accumulated Expense Depreciation Book Value Total

Answer 1

Solution

Depreciation schedule-Double declining
Year	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 90,000	$ 90,000	$ 180,000
2	$ 60,000	$ 150,000	$ 120,000
3	$ 40,000	$ 190,000	$ 80,000
4	$ 26,667	$ 216,667	$ 53,333
5	$ 17,778	$ 234,444	$ 35,556
6	$ 11,556	$ 246,000	$ 24,000
Total	$ 246,000

Working

Double declining Method
A	Cost	$ 270,000
B	Residual Value	$ 24,000
C=A - B	Depreciable base	$ 246,000
D	Life [in years]	6
E=C/D	Annual SLM depreciation	$ 41,000
F=E/C	SLM Rate	16.67%
G=F x 2	DDB Rate	33.33%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 270,000	33.33%	$ 90,000	$ 90,000	$ 180,000
2	$ 180,000	33.33%	$ 60,000	$ 150,000	$ 120,000
3	$ 120,000	33.33%	$ 40,000	$ 190,000	$ 80,000
4	$ 80,000	33.33%	$ 26,667	$ 216,667	$ 53,333
5	$ 53,333	33.33%	$ 17,778	$ 234,444	$ 35,556
6	$ 35,556	33.33%	$ 11,556	$ 246,000	$ 24,000