University Car Wash built a deluxe car wash across the street from campus. The new machines cost $270,000 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.Required:Prepare a depreciation schedule for six years using the following methods:1. Straight-line.2. Double-declining-balance.3. Activity-based.Actual use per year was as follows:Year Hours Used 1 3,100 2 1,100 3 1,200 4 2,800 5 2,600 6 1,200
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $270,000 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.
Required:
Prepare a
1. Straight-line.
2. Double-declining-balance.
3. Activity-based.
Actual use per year was as follows:
Year Hours Used
1 3,100
2 1,100
3 1,200
4 2,800
5 2,600
6 1,200
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