Question

1. Compute Units of Activity Depreciation for the Truck: Purchased July 1, $20,000 cost, $2,000 salvage value, 5 years useful life, Estimated usage 100,000 miles

Units of Activity Depreciation Calculation:

Deprec. Cost per Unit Rate= _Cost – Salvage Value

         Estimated Usage

Depre. Exp. = Actual Usage * Deprec. Cost per Unit Rate

Calculate Units of Activity Depreciation for each year:

Depre. Cost per Unit Rate= _Cost – Salvage Value = $

    Estimated Usage              

2018 Depreciation: 10,000 miles *$0.18= $1,800

2019 Depreciation: 20,000 miles*

2020 Depreciation: 25,000 miles *

2021 Depreciation: 20,000 miles*

2022 Depreciation: 15,000 miles*

2023 Depreciation: 10,000 miles*

2. The journal entry to record the Depreciation Expense for Year 1 is:

Date	Accounts	Debit	Credit
12/31/18	Depreciation Expense - Truck	$1,800
	Accumulated Deprec. - Truck		$1,800

The journal entry to record the Depreciation Expense for Year 2 is:

Date	Accounts	Debit	Credit
12/31/19

The journal entry to record the Depreciation Expense for Year 3 is:

Date	Accounts	Debit	Credit
12/31/20

The journal entry to record the Depreciation Expense for Year 4 is:

Date	Accounts	Debit	Credit
12/31/21

Answer 1

Depreciation rate per mile = (Purchase cost – Salvage) / Estimated usage of miles

             = ($20000 - $2000) / 100000 miles = $0.18

2018 Depreciation: 10,000 miles * $0.18 = $1,800

2019 Depreciation: 20,000 miles * $0.18 = $3600

2020 Depreciation: 25,000 miles * $0.18 = $4500

2021 Depreciation: 20,000 miles * $0.18 = $3600

2022 Depreciation: 15,000 miles * $0.18 = $2700

2023 Depreciation: 10,000 miles * $0.18 = $1800

The journal entry to record the Depreciation Expense for Year 1 is:

Date	Accounts	Debit	Credit
12/31/18	Depreciation Expense - Truck	$1,800
	Accumulated Deprec. - Truck		$1,800

The journal entry to record the Depreciation Expense for Year 2 is:

Date	Accounts	Debit	Credit
12/31/19	Depreciation Expense - Truck	$3600
	Accumulated Deprec. - Truck		$3600

The journal entry to record the Depreciation Expense for Year 3 is:

Date	Accounts	Debit	Credit
12/31/20	Depreciation Expense - Truck	$4500
	Accumulated Deprec. - Truck		$4500

The journal entry to record the Depreciation Expense for Year 4 is:

Date	Accounts	Debit	Credit
12/31/21	Depreciation Expense - Truck	$3600
	Accumulated Deprec. - Truck		$3600