Prior to adjustment at the end of the year…

Question:

Depreciation by units-of-output 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:

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:

**Depreciation of truck 3 for the current year is $2,480 ($0.31 x 8,000). However, the depreciation is limited to $1,860, which reduces the book value of the truck 3 to $10,900, its residual value.

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