ACCT 251 Problem 7-5A Determine depreciation under three methods (LO7-4)/ Eastern Washington University

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Problem 7-5A Determine depreciation under three methods (LO7-4) [The following information applies to the questions displayed below.] University Car Wash built a deluxe car wash across the stre... et 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. 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 References Section Break Problem 7-5A Determine depreciation under three methods (LO7- 4) 5. Award: 2 out of 2.00 points Problem 7-5A Part 1 Required: 1. Prepare a depreciation schedule for six years using the straight­line method. (Do not round your intermediate calculations.) UNIVERSITY CAR WASH Depreciation Schedule—Straight­Line End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $ 41,000 $ 41,000 $ 229,000 2 41,000 82,000 188,000 3 41,000 123,000 147,000 4 41,000 164,000 106,000 5 41,000 205,000 65,000 6 41,000 246,000 24,000 Total $ 246,000 References Worksheet Problem 7­5A Part 1 Learning Objective: 07­04 Calculate depreciation of property, plant, and equipment. UNIVERSITY CAR WASH Depreciation Schedule—Straight­Line End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $41,000+/­0.02% $41,000+/­0.02% $ +/­0.005% 229,000 2 41,000+/­0.02% 82,000+/­0.02% 188,000+/­0.01% 3 41,000+/­0.02% 123,000+/­0.02% 147,000+/­0.02% 4 41,000+/­0.02% 164,000+/­0.02% 106,000+/­0.03% 5 41,000+/­0.02% 205,000+/­0.02% 65,000+/­0.1% 6 41,000+/­0.02% 246,000+/­0.02% 24,000+/­0.2% Total $ 246,000 Explanation: University Car Wash Depreciation Schedule—Straight­Line Calculation End of Year Amounts Depreciable Cost* Depreciation Depreciation Accumulated Book Value** Year × Rate = Expense Depreciation 1 246,000 1/6 41,000 41,000 229,000 2 246,000 1/6 41,000 82,000 188,000 3 246,000 1/6 41,000 123,000 147,000 4 246,000 1/6 41,000 164,000 106,000 5 246,000 1/6 41,000 205,000 65,000 6 246,000 1/6 41,000 246,000 24,000 Total 246,000 * $270,000 – $24,000 = $246,000 ** $270,000 cost minus accumulated depreciation 6. Award: 2 out of 2.00 points Problem 7-5A Part 2 2. Prepare a depreciation schedule for six years using the double­declining­balance method. (Do not round your intermediate calculations.) UNIVERSITY CAR WASH Depreciation Schedule—Double­Declining­Balance End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $ 90,000 $ 90,000 $ 180,000 2 60,000 150,000 120,000 3 40,000 190,000 80,000 4 26,667 216,667 53,333 5 17,778 234,445 35,555 6 11,555 246,000 24,000 Total $ 246,000 References Worksheet Problem 7­5A Part 2 Learning Objective: 07­04 Calculate depreciation of property, plant, and equipment. UNIVERSITY CAR WASH Depreciation Schedule—Double­Declining­Balance End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $90,000+/­0.02% $90,000+/­0.02% $ +/­0.005% 180,000 2 60,000+/­0.02% 150,000+/­0.02% 120,000+/­0.02% 3 40,000+/­0.05% 190,000+/­0.01% 80,000+/­0.02% 4 26,667+/­0.01% 216,667+/­0.01% 53,333+/­0.03% 5 17,778+/­0.02% +/­0.005% 234,445 35,555+/­0.03% 6 11,555+/­1% 246,000 24,000 Total $ 246,000 Explanation: University Car Wash Depreciation Schedule—Double­Declining­Balance Calculation End of Year Amounts Beginning Depreciation Depreciation Accumulated Year Book Value × Rate* = Expense Depreciation Book Value** 1 270,000 1/3 90,000 90,000 180,000 2 180,000 1/3 60,000 150,000 120,000 3 120,000 1/3 40,000 190,000 80,000 4 80,000 1/3 26,667 216,667 53,333 5 53,333 1/3 17,778 234,445 35,555 6 35,555 11,555*** 246,000 24,000 Total 246,000 * 2/6 years = 1/3 per year ** $270,000 cost minus accumulated depreciation *** Amount needed to reduce book value to residual value. This study source was downloaded by 100000849840424 from CourseHero.com on 09-10-2022 06:45:31 GMT -05:00 7. Award: 2 out of 2.00 points Problem 7-5A Part 3 3. Prepare a depreciation schedule for six years using the activity­based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.) UNIVERSITY CAR WASH Depreciation Schedule—Activity­Based End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $ 63,550 $ 63,550 $ 206,450 2 22,550 86,100 183,900 3 24,600 110,700 159,300 4 57,400 168,100 101,900 5 53,300 221,400 48,600 6 24,600 246,000 24,000 Total $ 246,000 References Worksheet Problem 7­5A Part 3 Learning Objective: 07­04 Calculate depreciation of property, plant, and equipment. UNIVERSITY CAR WASH Depreciation Schedule—Activity­Based End of year amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $ 63,550 $ 63,550 $ 206,450 2 22,550 86,100 183,900 3 24,600 110,700 159,300 4 57,400 168,100 101,900 5 53,300 221,400 48,600 6 24,600 246,000 24,000 Total $ 246,000 Explanation: University Car Wash Depreciation Schedule—Activity­Based Calculation End of Year Amounts Year Hours Used × Depreciation Rate* = Depreciation Expense Accumulated Depreciation Book Value** 1 3,100 $20.50 63,550 63,550 206,450 2 1,100 $20.50 22,550 86,100 183,900 3 1,200 $20.50 24,600 110,700 159,300 4 2,800 $20.50 57,400 168,100 101,900 5 2,600 $20.50 53,300 221,400 48,600 6 1,200 $20.50 24,600 246,000 24,000 Total 12,000 246,000 * $246,000/12,000 hours = $20.50/hour ** $270,000 cost minus accumulated depreciation This study source was downloaded by 100000849840424 from CourseHero.com on 09-10-2022 06:45:31 GMT -05:00 [Show More]

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