Question

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University Car Wash built a deluxe car wash across the street from campus. The new machines cost $219,000 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
123456
Hours Used
2,800
1,400
1,500
2,500
2,300
2,000

Answer 1

Explanation:

Calculate the total hours used: We add up the hours used each year to find the total hours used:

2,800 + 1,400 + 1,500 + 2,500 + 2,300 + 2,000 = 12,500

Calculate the total depreciation: We subtract the residual value from the cost to find the total depreciation:

$219,000 - $19,500 = $199,500

Calculate the annual depreciation expense: We divide the total depreciation by the number of years to find the annual depreciation expense:

$199,500 / 6 = $33,250

Calculate the depreciation expense per hour: We divide the annual depreciation expense by the estimated total hours to find the depreciation expense per hour:

$33,250 / 12,500 = $2.66

So the depreciation expense per hour is $2.66.

Calculate the depreciation expense for each year: We multiply the hours used each year by the depreciation expense per hour to find the depreciation expense for each year:

Year 1: 2,800 * $2.66 = $7,448

Year 2: 1,400 * $2.66 = $3,724

Year 3: 1,500 * $2.66 = $3,990

Year 4: 2,500 * $2.66 = $6,650

Year 5: 2,300 * $2.66 = $6,118

Year 6: 2,000 * $2.66 = $5,320

So the depreciation expense for each year is:

Year 1: $7,448

Year 2: $3,724

Year 3: $3,990

Year 4: $6,650

Year 5: $6,118

Year 6: $5,320