[The following information applies to the questions displayed below.] University

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[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 $261,000 including installation. The company estimates that the equipment will have a residual value of $27,000. 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:

1.

value:
5.88 points

Required information

Required:

1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
  

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 07-04 Calculate depreciation of property, plant, and equipment.

Check my work

2.

value:
5.88 points

Required information

2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
  

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 07-04 Calculate depreciation of property, plant, and equipment.

Check my work

3.

value:
5.88 points

Required information

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.)
  

Year Hours Used 1 2,800 2 1,400 3 1,500 4 2,500 5 2,300 6 1,500

Explanation / Answer

Solution:-

1. Prepare a depreciation schedule for six years using the straight-line method:-

* $ 261,000 - $ 27,000 = 234,000

** $ 261,000 cost minus accumulated depreciation.

2. Prepare a depreciation schedule for six years using the double-declining-balance method:-

* 1 / 6 years X 2 = 0.33 per year

** $ 261,000 cost minus accumulated depreciation

*** Amount needed to reduce book value to residual value.

3. Prepare a depreciation schedule for six years using the activity-based method:-

* ($ 261,000 - $ 27,000) / 12,000 miles = $ 19.5 / miles

** $ 261,000 cost minus accumulated depreciation

Please Rate or comment if you have any doubt regarding this solution.

University Car Wash Year Calculation = End of year amount Allocation base* * Depreciation rate Depreciation expense Accumulated depreciation Book value** 1 234,000 1/6 39,000 39,000 222,000 2 234,000 1/6 39,000 78,000 183,000 3 234,000 1/6 39,000 117,000 144,000 4 234,000 1/6 39,000 156,000 105,000 5 234,000 1/6 39,000 195,000 66,000 6 234,000 1/6 39,000 234,000 27,000 Total 234,000

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