University Car Wash built a deluxe car wash across the street from campus. The n
ID: 2560693 • Letter: U
Question
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $228,000 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:
1,300
1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
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.)
1,300
Explanation / Answer
1) Straight line depreciatiom (228000-24000)/6 34000 year Amount Depr accumu book dep value 1 228,000 34,000 34,000 194000 2 194000 34,000 68000 160000 3 160000 34,000 102000 126000 4 126000 34,000 136000 92000 5 92000 34,000 170000 58000 6 58000 34,000 204000 24000 2) DDB rate = 1/6*2 0.333333 year Amount Depr accumu book dep value 1 228,000 76,000 76,000 152000 2 152,000 50,667 126667 101333 3 101333 33778 160445 67555 4 67555 22518 182963 45037 5 45037 15012 197975 30025 6 30025 6025 204000 24000 3) rate = (228000-24000)/12000 17 year Amount Depr accumu book dep value 1 228,000 51,000 51,000 177000 2 194000 28,900 79900 148,100 3 160000 30,600 110500 117,500 4 126000 37,400 147900 80,100 5 92000 34,000 181900 46100 6 58000 22,100 204000 24000
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