Page 104 - Demo

Ch(4):Depreciation of Plant Assets1013-UNITS-OF-ACTIVITY (PRODUCTION)a)Compute annual depreciation expenseA two-step process is used units-of-activity depreciation. AnnualPeriodDepreciation for the periodEnd of PeriodNumber ofUnitsDepreciation cost per unitDepreciation ExpenseAccumulatedDepreciationBook Value30/9/2018----84,00031/12/201860,000%u00d7 0.50=30,000 30,00054,40031/12/201940,000%u00d70.50=20,00050,00034,00031/12/202030,000%u00d70.50=15,00065,00019,00031/12/202130,000%u00d70.50=15,00080,0004,000b)Prepare the adjusted entry for year 2018.DateExplanationDebitCreditDec,31Depreciation Expense -Machines 30,0002018Accumulated Depreciation30,000Notes:1-For this method,the date of the purchase must be ignore because it dependson units of activity.2-No need to increase year 2022 to completeuseful life 4 years.Step 1Depreciation cost per unit = Cost%u2212SalvageValueTotalUnitsofProduction= 84,000%u22124,000160,000= BD0.50 / mileStep 2Depreciation expense = Depreciation cost per unit%u00d7 Units produce in period.