Question

Depreciation by Units-of-activity Method

A diesel-powered tractor with a cost of $304,360 and estimated residual value of $4,900 is expected to have a useful operating life of 93,000 hours. During April, the tractor was operated 100 hours.

Determine the depreciation for the month. If required, carry out any division to two decimal places.
$

Willow Creek Company purchased and installed carpet in its new general offices on April 30 for a total cost of $35,136. The carpet is estimated to have a 16-year useful life and no residual value.

A.	Prepare the journal entry necessary for recording the purchase of the new carpet. Refer to the Chart of Accounts for exact wording of account titles.
B.	Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet, assuming that Willow Creek Company uses the straight-line method. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer 1
Units of activity depreciation
(Cost – Salvage value) / Expected lifetime units
Units of activity depreciation =
(304360 - 4900) / 93000 = 3.22 per hour
For April depreciation = 3.22 x 100 = 322

Answer - 2
A)
account and explanation	Debit	Credit
Fixed assets - carpets	$35,136
Cash		$36,136
(To record purchase fixed assets)
B)
account and explanation	Debit	Credit
Depreciation expense	$1,464		$35,136/16 Year*8 Months/12 Months
Accumulated depreciation - carpets		$1,464
(To record Partial year depreciation)

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