Question

Chapter 10 Calculator Book 4 Show Me How Depreciation by units of activity method 1. PE 10.013 Chart of Account First Question Joumal 2 PE 10 02 ALGO 3. TMM 10.02 Instructions 4. PE 1005 ALGO Prior to the end of the year the balance in tudi 2.00 and the balance med Deprecation-Trucks is 5,700 Details of the subsidiary 5. EX 1008 BLANKSHEET 6. EX 100B ALGO TheN Cost $20.000 7. PE 10 028 EXCEL ALGO 1 2 Estimated Reside Useful $15.000 250 000 3000 10.500 200 miles 22 200 200.000 Accumulated Depreciation at Miles Operated Begiving of Year During Year 21.000 miles S14400 23.500 miles 60.140 8000 25.200 8. PE 10.096 EXCEL ALGO 54000 72.000 90 000 9. EX 10.10 EXCELALOO 10 PR 1002 ALGO Debreather and the amount credited one and on fach y account or red during the current year en mind the can reduce book warme

Answer 1

Depreciation based on units of activity takes in Accounts the overall units activity in life and based on it the actual units produced basis depreciation is calculated. First the depreciation per unit is calculated as the deviding the depreciation base amount ( cost - salvage value) with the total units of activity. Then the arrived per units of depreciation for activity is multiplied with each number of activity in the period.

Here for the trucks the depreciation per mile will be calculated as ( cost - salvage value) / useful life.

Thus,

For Truck 1 : Rate per mile = Depreciation Base / useful life = ( 80,000 - 15,000) / 250,000 = 0.26 per mile.

So depreciation during the year for Truck 1 = Miles during the period × Rate per mile

Depreciation for Truck 1 = 21000 × $ 0.26 = $ 5460.

In same way depreciation for Truck 2 = $ 360

Depreciation for Truck 3 = $ 1860 ( here depreciation is coming as 2480 but due to book value can not be less than salvage value so depreciation is restricted to salvage value only )

Depreciation for Truck 4 = $ 6,300.

Thus total depreciation for the Trucks during the period = $ 18,980.

Here the journal entry will be made for the depreciation expenses as debit and accumulated depreciation as credit as follows:

Date	Description	Post ref	Debit	Credit
	Depreciation expense - Trucks		18,980
	Accumulated depreciation - Trucks			18980