COST ACCOUNTING 317 



result gives the approximate cost of maintaining the equipment 

 for each hour of its use. 



Using the hourly rate to the nearest cent, 1 as just determined, 

 proceed to make an entry debiting the various farm elements 

 for the use of the equipment, based on the number of hours it 

 was used on each element, crediting Equipment Expense and 

 Exchange Labor accounts. (This process will be accomplished 

 best by using the third column shown under Horse Labor Sum- 

 mary under instruction 7 above before framing the journal entry. 

 This method takes the place of the one described under "Equip- 

 ment Expense" and shown in Illustration 53.) (See also instruc- 

 tion 11, problem 1, Chapters VIII and IX.) Post the entry. 



13. Calculate and enter the inventories of fertilizer, labor, 

 horse labor and other charges to field accounts, which are to be 

 carried over to next year's operations. 



In field No. 1 consider that the corn crop of the year just 

 closing, received 40 per cent, of the benefit of the soil from its 

 lying fallow the year before. This means that 60 per cent, of 

 $90 (the rent for the year 1914), or $54, is to be carried down 

 as an inventory. All of the 1915 rent remains as a charge to the 

 operations of the current year. 



In fields No. 2 and No. 3 the inventories consist in each case 

 of the three items noted in the explanation column of the ledger 

 as Labor-1916, Horse Labor-1916 and Equipment use-1916. 

 These should be shown as separate items both above and below 

 the rulings. All of the manure applied on field No. 3 during 

 the year is carried over as a deferred charge, since it was ap- 

 plied after harvesting the crop of the current year. 



The clover seed of field No. 4 is considered as an inventory 

 or deferred charge. No labor is carried over for this, for it 

 was sown with the oats. 



Since there were no transactions with field No. 5 after open- 

 ing the books on March 1, 1915, all of the debit balance is to 

 be treated as an inventory. By leaving the account exactly as 



1 Dropping the fractional part of a cent results in a distribution 

 of Equipment Expense amounting to about $15 or $20 less than the 

 balance of the account. This difference is distributed later through 

 General Expense account. See instruction 14 below. 



