University Car Wash built a deluxe car wash across the street from campus. The n
ID: 2469178 • Letter: U
Question
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $231,000 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 1,800 3 1,900 4 2,100 5 1,900 6 1,900
How do I create a depreciation schedule for end of the year amounts using all 3 forms of depreciation?
Explanation / Answer
1
Depreciation schedule
(Using Staright Line Depreciation method)
Formula :
Depreciation = (Cost - Residual Value ) / Life =
Depreciation = (231000 - 25500 ) / 6 = $34250
Year
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B
C
D = C-B
1
$ 34,250
$ 34,250
$ 231,000
$ 196,750
2
$ 34,250
$ 68,500
$ 231,000
$ 162,500
3
$ 34,250
$ 102,750
$ 231,000
$ 128,250
4
$ 34,250
$ 137,000
$ 231,000
$ 94,000
5
$ 34,250
$ 171,250
$ 231,000
$ 59,750
6
$ 34,250
$ 205,500
$ 231,000
$ 25,500
2
Depreciation schedule
(Using double Declining Depreciation method)
Formula :
Depreciation = Previous Book Value * 2 / Life
Year
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B
C
D = C-B
0
$ -
$ -
$ 231,000
$ 231,000
1
$ 77,000
$ 77,000
$ 231,000
$ 154,000
(231000*2/6)
2
$ 51,333
$ 128,333
$ 231,000
$ 102,667
(154000*2/6)
3
$ 34,222
$ 162,556
$ 231,000
$ 68,444
(102667*2/6)
4
$ 22,815
$ 185,370
$ 231,000
$ 45,630
(68444*2/6)
5
$ 15,210
$ 200,580
$ 231,000
$ 30,420
(45630*2/6)
6
$ 10,140
$ 210,720
$ 231,000
$ 20,280
(30420*2/6)
3
Depreciation schedule
(Using Units of Production method)
Formula :
Depreciation = (Cost - Residual Value) * Hours Used in the year / Total Expected Hours in Life
Year
Hours Used
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B = (231000-25500)*A / 12500
C
D
E = D-C
1
2900
$ 47,676
$ 47,676
$ 231,000
$ 183,324
2
1800
$ 29,592
$ 77,268
$ 231,000
$ 153,732
3
1900
$ 31,236
$ 108,504
$ 231,000
$ 122,496
4
2100
$ 34,524
$ 143,028
$ 231,000
$ 87,972
5
1900
$ 31,236
$ 174,264
$ 231,000
$ 56,736
6
1900
$ 31,236
$ 205,500
$ 231,000
$ 25,500
1
Depreciation schedule
(Using Staright Line Depreciation method)
Formula :
Depreciation = (Cost - Residual Value ) / Life =
Depreciation = (231000 - 25500 ) / 6 = $34250
Year
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B
C
D = C-B
1
$ 34,250
$ 34,250
$ 231,000
$ 196,750
2
$ 34,250
$ 68,500
$ 231,000
$ 162,500
3
$ 34,250
$ 102,750
$ 231,000
$ 128,250
4
$ 34,250
$ 137,000
$ 231,000
$ 94,000
5
$ 34,250
$ 171,250
$ 231,000
$ 59,750
6
$ 34,250
$ 205,500
$ 231,000
$ 25,500
2
Depreciation schedule
(Using double Declining Depreciation method)
Formula :
Depreciation = Previous Book Value * 2 / Life
Year
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B
C
D = C-B
0
$ -
$ -
$ 231,000
$ 231,000
1
$ 77,000
$ 77,000
$ 231,000
$ 154,000
(231000*2/6)
2
$ 51,333
$ 128,333
$ 231,000
$ 102,667
(154000*2/6)
3
$ 34,222
$ 162,556
$ 231,000
$ 68,444
(102667*2/6)
4
$ 22,815
$ 185,370
$ 231,000
$ 45,630
(68444*2/6)
5
$ 15,210
$ 200,580
$ 231,000
$ 30,420
(45630*2/6)
6
$ 10,140
$ 210,720
$ 231,000
$ 20,280
(30420*2/6)
3
Depreciation schedule
(Using Units of Production method)
Formula :
Depreciation = (Cost - Residual Value) * Hours Used in the year / Total Expected Hours in Life
Year
Hours Used
Depreciation expense
Accumulated Depreciation
Cost
Book Value
A
B = (231000-25500)*A / 12500
C
D
E = D-C
1
2900
$ 47,676
$ 47,676
$ 231,000
$ 183,324
2
1800
$ 29,592
$ 77,268
$ 231,000
$ 153,732
3
1900
$ 31,236
$ 108,504
$ 231,000
$ 122,496
4
2100
$ 34,524
$ 143,028
$ 231,000
$ 87,972
5
1900
$ 31,236
$ 174,264
$ 231,000
$ 56,736
6
1900
$ 31,236
$ 205,500
$ 231,000
$ 25,500
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