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 street from campus. The
...
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 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. 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
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