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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Depreciation by units-of-activity method

Prior to adjustment at the end of the year, the balance in Trucks is $296,900 and the balance in Accumulated Depreciation—Trucks is $99,740. Details of the subsidiary ledger are as follows:

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  1. a. Determine for each truck the depreciation rate per mile and the amount to be credited to the accumulated depreciation section of each subsidiary account for the miles operated during the current year.
  2. b. Journalize the entry on December 31 to record depreciation for the year.

(a)

To determine

Unit-of-activity Method: Under this method of depreciation, the depreciation expense is calculated on the basis of units produced in a year. This method is suitable when a company has fluctuating productive rate. The formula to calculate the depreciation expense under this method is as follows:

Depreciation per unit = CostResidual valueEstimated units of useful life

Depreciation Expense = Depreciation per unit × Usage

To determine: the depreciable rate per mile for each truck.

Explanation

Determine the depreciable rate per mile for each truck.

b.

To determine

To journalize: the entry on December 31 to record the depreciation expense for the year.

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