Looking at problem #5. 1. Prepare a depreciation schedule using Straight-line me
ID: 2577580 • Letter: L
Question
Looking at problem #5.
1. Prepare a depreciation schedule using Straight-line method
2. Prepare a depreciation schedule using double-declining balance.
5) University Car Wash buill a deluxe car wash across the street from ca The compary est mates that the equipment will have a cost s270,000 including installation. residual value of $24,000. University Car Wash also estmates it will use the machine for six years or about 12,000 total hours Required Prepare a depreciation schedule far six years using the following methods: 2, Double-declining-balance 6) Sicily Pizza purchased baking ovens frem New Works Deli New World Deli was closing its bakery business and sold its three-year-old ovens for $341,000 In addition to the purchase price, Sicity Pizza paid shipping costs of $16,000 Emplayees of Sicly Pizza installed the ovens; labor costs were $17,000 An outside contractor performed some of the electrical work for $3,800. Sicily Pizza consumed pizza dough with a cost of $1,300 in testing the ovens. tt then instolled new timers on the ovens at a cost of $800 and placed the machines in operatión. Required 1. Prepare a schedale showing the amouns at which Sicily Pizza shoald record the ovens in the Equipment account uld be recordedExplanation / Answer
A)
Straight line depreciation:
Yearly depreciation for 6 years (year 1 to year 6)
= (Equipment cost - salvage value)/useful life
= (270000-24000)/6
= 41000
B)
Double declining method:
The yearly depreciation = 2*100%/6 of book value at the beginning of period
= 33.33% of current book value
Year 1: = 33.33% * 270000 = 90000
Year 2: = 33.33% * (270000-90000) = 60000
Year 3: 33.33% * (180000-60000) = 40000
Year 4: 33.33% * (120000-40000) = 26666.67
Year 5: 33.33% * (80000-26666.67) = 17777.77
Year 6: 33.33% * (53333.33-17777.77) = 11851.85
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