Question

On January 1, 2017, Quick Travel Transportation Company purchased a used aircraft at a cost of $63,200,000. Quick Travel expects the plane to remain useful for five years (7,000,000 miles) and to have a residual value of $5,200,000. Quick Travel expects to fly the plane 850,000 miles the first year, 1,325,000 miles each year during the second, third, and fourth years, and 2,175,000 miles the last year. Read the requirements. 1. Compute Quick Travel's depreciation for the first two years on the plane using the straight-line method, the units-of-production method, and the double-declining balance method. a. Straight-line method Using the straight-line method, depreciation is $ L for 2017 and $ for 2018. b. Units-of-production method (Round the depreciation per unit of output to two decimal places to compute your final answers.) Using the units-of-production method, depreciation is $ for 2017 and $ for 2018. c. Double-declining balance method Using the double-declining-balance method, depreciation is $ D f or 2017 and $ D for 2018. 2. Show the airplane's book value at the end of the first year under each method. Units-of- Double-Declining-

Answer 1

B11 X for la A B C D E F G H I J K L M straight line cost of aircraft $63,200,000 residual value $5,200,000 depreciable value $ 58,000,000 life (years) annual depreciation $ 11,600,000 depreciation for 2017 $ 11,600,000 depreciation for 2018 $ 11,600,000 units-of-production cost of aircraft $63,200,000 residual value $5,200,000 depreciable value $ 58,000,000 expected miles 7,000,000 depreciation per mile $ 8.29 depreciation for 2017 $ 7,046,500 depreciation for 2018 $ 10,984,250 double declining balance straight line rate 20% double declining rate 40% depreciation for 2017 $ 25,280,000 depreciation for 2018 $ 15,168,000 straight-line method under the straight-line method, depreciation is $ 11,600,000 for 2017 and $ 11,600,000 for 2018 Units-of-production method under the units-of-production method, depreciation is $ 7,046,500 for 2017 and $ 10,984,250 for 2018 Double declining balance method under the double declining balance method, depreciation is $ 25,280,000 for 2017 and $| 15,168,000 for 2018 book value: cost price less: accumulated depreciation book value Straight-line $63,200,000 -$ 11,600,000 $ 51,600,000 Units-of-production $63,200,000 -$ 7,046,500 $ 56,153,500 Double declining balance $63,200,000 -$ 25,280,000 $ 37,920,000

for formulas and calculations, refer to the image below -

B11 fix la X C A B D E F G H I J K L M straight line cost of aircraft 63200000 residual value 5200000 depreciable value =E3-E4 life (years) annual depreciation =E5/E6 depreciation for 2017 =E7 depreciation for 2018 =E7 units-of-production cost of aircraft 63200000 residual value 5200000 depreciable value =13-14 expected miles 7000000 depreciation per mile =ROUND(15/16,2) depreciation for 2017 |=17*850000 depreciation for 2018 |=17*1325000 double declining balance straight line rate =100%/5 double declining rate =L3*2 depreciation for 2017 |=63200000*L4 depreciation for 2018 |=(63200000-L5) *L4 straight-line method under the straight-line method, depreciation is $ =E8 for 2017 and $ =E9 for 2018 Units-of-production method under the units-of-production method, depreciation is $ =18 for 2017 and $ =19 for 2018 Double declining balance method under the double declining balance method, depreciation is $ =L5 for 2017 and $ =L6 for 2018 book value: cost price less: accumulated depreciation book value Straight-line =E3 --E8 =F21+F22 Units-of-production =F21 =-18 Double declining balance =G21 =-L5 =121+122 =G21+G22

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