diff --git a/app/models/time_entry_activity.rb b/app/models/time_entry_activity.rb
index f2a18d1d0..58a6de13d 100644
--- a/app/models/time_entry_activity.rb
+++ b/app/models/time_entry_activity.rb
@@ -24,11 +24,15 @@ class TimeEntryActivity < Enumeration
     OptionName
   end
 
+  def objects
+    TimeEntry.where(:activity_id => self_and_descendants(1).map(&:id))
+  end
+
   def objects_count
-    time_entries.count
+    objects.count
   end
 
   def transfer_relations(to)
-    time_entries.update_all("activity_id = #{to.id}")
+    objects.update_all(:activity_id => to.id)
   end
 end
diff --git a/test/object_helpers.rb b/test/object_helpers.rb
index 8c82a328b..2f29793f2 100644
--- a/test/object_helpers.rb
+++ b/test/object_helpers.rb
@@ -107,10 +107,11 @@ module ObjectHelpers
   def TimeEntry.generate!(attributes={})
     entry = TimeEntry.new(attributes)
     entry.user ||= User.find(2)
-    entry.issue ||= Issue.find(1)
+    entry.issue ||= Issue.find(1) unless entry.project
     entry.project ||= entry.issue.project
     entry.activity ||= TimeEntryActivity.first
     entry.spent_on ||= Date.today
+    entry.hours ||= 1.0
     entry.save!
     entry
   end
diff --git a/test/unit/time_entry_activity_test.rb b/test/unit/time_entry_activity_test.rb
index 3a7547415..a094c84ca 100644
--- a/test/unit/time_entry_activity_test.rb
+++ b/test/unit/time_entry_activity_test.rb
@@ -84,5 +84,33 @@ class TimeEntryActivityTest < ActiveSupport::TestCase
     e.reload
     assert_equal "0", e.custom_value_for(field).value
   end
-end
 
+  def test_system_activity_with_child_in_use_should_be_in_use
+    project = Project.generate!
+    system_activity = TimeEntryActivity.create!(:name => 'Activity')
+    project_activity = TimeEntryActivity.create!(:name => 'Activity', :project => project, :parent_id => system_activity.id)
+
+    TimeEntry.generate!(:project => project, :activity => project_activity)
+
+    assert project_activity.in_use?
+    assert system_activity.in_use?
+  end
+
+  def test_destroying_a_system_activity_should_reassign_children_activities
+    project = Project.generate!
+    system_activity = TimeEntryActivity.create!(:name => 'Activity')
+    project_activity = TimeEntryActivity.create!(:name => 'Activity', :project => project, :parent_id => system_activity.id)
+
+    entries = [
+      TimeEntry.generate!(:project => project, :activity => system_activity),
+      TimeEntry.generate!(:project => project, :activity => project_activity)
+    ]
+
+    assert_difference 'TimeEntryActivity.count', -2 do
+      assert_nothing_raised do
+        assert system_activity.destroy(TimeEntryActivity.find_by_name('Development'))
+      end
+    end
+    assert entries.all? {|entry| entry.reload.activity.name == 'Development'}
+  end
+end