the following information applies to the questions displayed below. university car wash built a deluxe car…

the following information applies to the questions displayed below. university car wash built a deluxe car wash across the street from campus. the new machines cost $210,000, including installation. the company estimates that the equipment will have a residual value of $19,500. university car wash also estimates it will use the machine for six years or about 12,500 total hours. 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 1,700 2. prepare a depreciation schedule for six years using the double - declining - balance method. note: do not round your intermediate calculations. 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 following information applies to the questions displayed below. university car wash built a deluxe car wash across the street from campus. the new machines cost $210,000, including installation. the company estimates that the equipment will have a residual value of $19,500. university car wash also estimates it will use the machine for six years or about 12,500 total hours. 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 1,700 2. prepare a depreciation schedule for six years using the double - declining - balance method. note: do not round your intermediate calculations. 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

Answer

Explanation:

Step1: Calculate straight - line depreciation rate

The asset has a useful life of 6 years. The straight - line depreciation rate $r=\frac{1}{6}$. The double - declining - balance rate $R = 2\times\frac{1}{6}=\frac{1}{3}\approx0.3333$.

Step2: Calculate depreciation for year 1

The initial cost of the asset $C = 210000$. Depreciation expense for year 1 $D_1=210000\times\frac{1}{3}=70000$. Accumulated depreciation $AD_1 = 70000$. Book value $BV_1=210000 - 70000=140000$.

Step3: Calculate depreciation for year 2

Depreciation expense for year 2 $D_2=140000\times\frac{1}{3}\approx46666.67$. Accumulated depreciation $AD_2=70000 + 46666.67 = 116666.67$. Book value $BV_2=140000-46666.67 = 93333.33$.

Step4: Calculate depreciation for year 3

Depreciation expense for year 3 $D_3=93333.33\times\frac{1}{3}\approx31111.11$. Accumulated depreciation $AD_3=116666.67+31111.11 = 147777.78$. Book value $BV_3=93333.33 - 31111.11=62222.22$.

Step5: Calculate depreciation for year 4

Depreciation expense for year 4 $D_4=62222.22\times\frac{1}{3}\approx20740.74$. Accumulated depreciation $AD_4=147777.78+20740.74 = 168518.52$. Book value $BV_4=62222.22-20740.74 = 41481.48$.

Step6: Calculate depreciation for year 5

We want to ensure that the final book value is the residual value of 19500. Depreciation expense for year 5 $D_5=41481.48 - 19500=21981.48$. Accumulated depreciation $AD_5=168518.52+21981.48 = 190500$. Book value $BV_5=19500$.

Step7: Calculate depreciation for year 6

Depreciation expense for year 6 $D_6 = 0$. Accumulated depreciation $AD_6=190500$. Book value $BV_6=19500$.

Year Depreciation Expense Accumulated Depreciation Book Value
1 70000 70000 140000
2 46666.67 116666.67 93333.33
3 31111.11 147777.78 62222.22
4 20740.74 168518.52 41481.48
5 21981.48 190500 19500
6 0 190500 19500
Total 190500 - -

Answer:

Year Depreciation Expense Accumulated Depreciation Book Value
1 70000 70000 140000
2 46666.67 116666.67 93333.33
3 31111.11 147777.78 62222.22
4 20740.74 168518.52 41481.48
5 21981.48 190500 19500
6 0 190500 19500
Total 190500 - -