## Question

###### University Car Wash built a deluxe car wash across the street from campus. The new machines...

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $264,000 including installation. The company estimates that the equipment will have a residual value of $25,500. 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 |

1 | 2,900 |

2 | 1,300 |

3 | 1,400 |

4 | 2,600 |

5 | 2,400 |

6 | 1,900 |

I need help preparing the depreciation schedule for six years using the double-depreciation method.

I need help preparing the depreciation schedule for six years using the activity-based method.

## Answers

1) Depreciation Schedule for six years using the double-depreciation method: Year Beginning book value Depreciation expense Ending Book Value a b=a*0.3333 c=a-b 1 $ 2,64,000.00 $ 87,999.99 $ 1,76,000.01 2 $ 1,76,000.01 $ 58,666.66 $ 1,17,333.35 3 $ 1,17,333.35 $ 39,111.11 $ 78,222.23 4 $ 78,222.23 $ 26,074.08 $ 52,148.16 5 $ 52,148.16 $ 17,382.72 $ 34,765.44 6 $ 34,765.44 $ 11,588.48 $ 23,176.96 Working: Straight line depreciation rate = 1/useful life = 1/6 = 0.16666667 Double declining rate = 2*0.16667 = 0.33333333 2) Year Beginning book value Depreciation expense Ending Book Value a b c=a-b 1 $ 2,64,000.00 $ 55,332.00 $ 2,08,668.00 2 $ 2,08,668.00 $ 24,804.00 $ 1,83,864.00 3 $ 1,83,864.00 $ 26,712.00 $ 1,57,152.00 4 $ 1,57,152.00 $ 49,608.00 $ 1,07,544.00 5 $ 1,07,544.00 $ 45,792.00 $ 61,752.00 6 $ 61,752.00 $ 36,252.00 $ 25,500.00 Working: Depreciation rate per hour = (Cost - Salvage Value)/Useful life = (264000-25500)/12500 = $ 19.08 Year Machine usage in hours Depreciation rate per hour Depreciation expense a b c=a*b 1 2900 $ 19.08 $ 55,332.00 2 1300 $ 19.08 $ 24,804.00 3 1400 $ 19.08 $ 26,712.00 4 2600 $ 19.08 $ 49,608.00 5 2400 $ 19.08 $ 45,792.00 6 1900 $ 19.08 $ 36,252.00

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