Question

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $267,000 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: Year Hours Used 1 3,000 2 1,200 3 1,300 4 2,700 5 2,500 6 1,300 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

Straight Line Depreciation = (Cost - Residual Value) ÷ Useful Life

= ($267,000 - $24,000) ÷ 6

= $40,500

 

Year    Opening book value    Dep.   Accumulated dep.  Closing book value

1           $267,000         $40,500        $40,500               $226,500    

2           $226,500         $40,500        $81,000               $186,000    

3           $186,000       $40,500        $121,500               $145,500    

4           $145,500           $40,500        $162,000               $105,000    

5           $105,000         $40,500        $202,500       $64,500    

6           $64,500         $40,500        $243,000       $24,000