Question

Required Information Problem 7-5A Determine depreciation under three methods (L07-4) [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 $216,000 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 2.ee 1,3ee 1.4ee 2,6ee 2.400 1.989 Problem 7-5A Part 3 3. Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use thls amount In all subsequent calculations.) UNIVERSITY CAR WASH Depreciation Schedule-Activity-Based End of year amounts Depreciation Accumulated Expense Depreciation Book Value Year Total

Answer 1

1) Depreciation schedule : Activity method

Year	Depreciation expense	Accumulated depreciation	Book value
1	45588	45588	170412
2	20436	66024	149976
3	22008	88032	127968
4	40872	128904	87096
5	37728	166632	49368
6	29868	196500	19500
Total	196500

2) Depreciation schedule: Double decline balance

Year	Depreciation expense	Accumulated depreciation	Book value
1	216000/3 = 72000	72000	144000
2	48000	120000	96000
3	32000	152000	64000
4	21333	173333	42667
5	14222	187555	28445
6	8945	196500	19500
Total	196500