Given Data AUBURN CAR WASH Cost of new car wash machines Est

Given Data: AUBURN CAR WASH Cost of new car wash machines Estimated residual value Machine life in years Machine life in hours $ 500,000 $20,000 10,000 Actual use per year: Hours Used Year 2,000 1,500 1,400 1,800 2,000 1,300

Solution

It is observed that at the end of 6th year book value will come higher by calculating a depreciation through straight line value method

Auburn Car Wash ( Activity Activity Based)
	Calculation	=		End of Year Amount
Year	Hour used (i)		Depericaition rate(2)		Deperication expense 3=(1*2)	Accumulated depericiation	Book value ( Cost of machine-Accum deperication
1	2000		48		$   96,000.00	$          96,000.00	$           404,000.00
2	1500		48		$   72,000.00	$        168,000.00	$           332,000.00
3	1400		48		$   67,200.00	$        235,200.00	$           264,800.00
4	1800		48		$   86,400.00	$        321,600.00	$           178,400.00
5	2000		48		$   96,000.00	$        417,600.00	$             82,400.00
6	1300		48		$   62,400.00	$        480,000.00	$             20,000.00
Refer
	Depericiation charges	=	(Cost of Machine- Salvage Value)
				Total Estimated Hours
			=	(500000-20000)
				10000
			=	48
Auburn Car Wash ( Straight Line)
	Calculation	=		End of Year Amount
Year	Depriciable cost (1)		Depericaition rate (2)		Deperication expense 3=(1*2)	Accumulated depericiation	Book value ( Cost of machine-Accum deperication
1	$          500,000		16.67%		$   83,350.00	$          83,350.00	$           416,650.00
2	$          416,650		16.67%		$   69,455.56	$        152,805.56	$           347,194.45
3	$          347,194		16.67%		$   57,877.31	$        210,682.87	$           289,317.13
4	$          289,317		16.67%		$   48,229.17	$        258,912.03	$           241,087.97
5	$          241,088		16.67%		$   40,189.36	$        299,101.40	$           200,898.60
6	$          200,899		16.67%		$   33,489.80	$        332,591.20	$           167,408.80
Refer
	Depericiation rate	=	1
				Total estimated life
			=	1	=	16.67%
				6
Auburn Car Wash ( Double declining Balance)
	Calculation	=		End of Year Amount
Year	Beginning Boook value	X	Depericaition rate		Deperication expense	Accumulated depericiation	Book value ( Cost of machine-Accum deperication	Refer for depericiation Expense
1	$          500,000		0.33		$      165,000	$              165,000	$                 335,000	500000*0.33
2	$          335,000		0.33		$      110,550	$              275,550	$                 224,450	( 500000-165000)*0.33)
3	$          224,450		0.33		$         74,069	$              349,619	$                 150,382	( 500000-275500)*0.33)
4	$          150,382		0.33		$         49,626	$              399,244	$                 100,756	( 500000-349619)*0.33)
5	$          100,756		0.33		$         33,249	$              432,494	$                   67,506	( 500000-399244)*0.33)
6	$            67,506		0.33		$         22,277	$              454,771	$                   45,229	( 500000-432494)*0.33)
Refer
	Depericiation rate	=	1		*2
				Total estimated life
			=	1	*2=	16.67%
				6
					It is observed that at the end of 6th year book value will come higher by calculating a depreciation through straight line value method