EX 10-11 Depreciation by units-of-production method

Prior to adjustment at the end of the year, the balance in Trucks is $275,900 and the balance in Accumulated Depreciation—Trucks is $91,350. Details of the subsidiary ledger are as follows:


Truck No. Cost
Estimated Residual Value
Estimated Useful Life
Accumulated Depreciation at Beginning of Year
Miles Operated During Year 1 $75,000 $15,000 200,000 miles — 19,500 miles 2 38,000 3,000 200,000 $ 8,050 36,000 3 72,900 9,900 300,000 60,900 25,000 4 90,000 20,000 250,000 22,400 26,000

a. Determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation section of each of the subsidiary accounts for the miles operated during the current year.
b. Journalize the entry to record depreciation for the year.

Answer:
a. Depreciation per Rate per Mile:
Truck #1 ($75,000 – $15,000)/200,000 = $0.30
Truck #2 ($38,000 – $3,000)/200,000 = $0.175
Truck #3 ($72,900 – $9,900)/300,000 = $0.21
Truck #4 ($90,000 – $20,000)/250,000 = $0.28
   
   Credit to     Accumulated  Truck No. Rate per Mile Miles Operated Depreciation   1 30.0 cents 19,500 $ 5,850  2 17.5 36,000  6,300  3 21.0 25,000 2,100*  4 28.0 26,000  7,280  Total............................................................................................. $21,530  

*Mileage depreciation of $5,250 (21 cents × 25,000) is limited to $2,100, which reduces the book value of the truck to $9,900, its residual value.

b. Depreciation Expense—Trucks.................................... 21,530    
Accumulated Depreciation—Trucks.......................  21,530    
Truck depreciation.

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