University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000 including installation. The company estimates that the equipment will have a residual value of $30,000. 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: Year Hours Used 1 2,600 2 2,100 3 2,200 4 1,800 5 1,600 6 1,700 1)Prepare a depreciation schedule for six years using the double-declining-balance method. 2)Prepare a depreciation schedule for six years using the activity-based method
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000 including installation. The company estimates that the equipment will have a residual value of $30,000. 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: Year Hours Used 1 2,600 2 2,100 3 2,200 4 1,800 5 1,600 6 1,700 1)Prepare a depreciation schedule for six years using the double-declining-balance method. 2)Prepare a depreciation schedule for six years using the activity-based method
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000 including installation. The company estimates that the equipment will have a residual value of $30,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows:
| Year | Hours Used |
| 1 | 2,600 |
| 2 | 2,100 |
| 3 | 2,200 |
| 4 | 1,800 |
| 5 | 1,600 |
| 6 | 1,700 |
1)Prepare a
2)Prepare a depreciation schedule for six years using the activity-based method
Transcribed Image Text:**Instruction:**
Prepare a depreciation schedule for six years using the double-declining-balance method. *(Do not round your intermediate calculations.)*
**Table Description:**
**UNIVERSITY CAR WASH**
Depreciation Schedule—Double-Declining-Balance
End of year amounts
| Year | Depreciation Expense | Accumulated Depreciation | Book Value |
|------|----------------------|--------------------------|------------|
| 1 | | | |
| 2 | | | |
| 3 | | | |
| 4 | | | |
| 5 | | | |
| 6 | | | |
| **Total** | **$** | | |
- The total is labeled as "$0" to indicate that calculations are yet to be completed.
Transcribed Image Text:**Educational Exercise: Depreciation Schedule Preparation**
**3. Task:** Prepare a depreciation schedule for six years using the activity-based method. Ensure you **round your "Depreciation Rate" to 2 decimal places** and apply this rate in all subsequent calculations.
**Table Overview: University Car Wash**
**Depreciation Schedule—Activity-Based**
**End of Year Amounts**
- **Columns:**
- Year
- Depreciation Expense
- Accumulated Depreciation
- Book Value
- **Rows:**
- Years 1 through 6
- Total
**Table Details:**
- **Year 1 to 6:** Each row represents a year within the six-year schedule. Input the calculations for each year under the appropriate columns: Depreciation Expense, Accumulated Depreciation, and Book Value.
- **Total Row:** This row is meant to sum up the Depreciation Expense column, beginning with an initial value of $0.
**Instructions:**
1. Calculate the depreciation expense for each year using the activity-based method.
2. Accumulate the depreciation from year to year.
3. Deduct the accumulated depreciation from the original asset value to determine the book value at the end of each year.
**Graphical Component:**
The table is divided into columns and rows, providing a structured approach to calculate and track the depreciation expense, accumulated depreciation, and the book value of the asset over the specified period. The specific numbers and formulae used are to be calculated based on activity levels.
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