Question

Assume that at the beginning of 2017, US Air purchased a Bombardier Q400 aircraft at a cost of $23,000,000. US Air expects the plane to remain useful for five years (4,450,000 km) and to have a residual value of $5,500,000. US Air expects the plane to be flown 800,000 km the first year, 1,150,000 km each year during years 2 through 4, and 200,000 km the last year. 1. Compute US Air's first-year depreciation on the plane using the following methods: a. Straight-line b. Units-of-production c. Double-diminishing-balance 2. Show the airplane's carrying amount at the end of the first year under each depreciation method. Requirement 1. Compute US Air's first-year depreciation on the plane. a. Using the straight-line method, depreciation is $ . . (Hold all decimals during interim calculations. Round the final solution to the nearest whole b. Using the units-of-production method, depreciation is $ number.) c. Using the double-diminishing-balance method, depreciation is $ . Requirement 2. Show the airplane's carrying amount at the end of the first year under each depreciation method. (Use parentheses or a minus sign when subtracting numbers.) Units-of- Double-Declining- Carrying amount: Straight-Line Production Balance Cost Less: Accumulated depreciation Carrying amount

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) 3 Straight Line Method, Depreciation = (cost - residual value)/ No. of Years = (23000000-5500000)/5 5 = $ 3500000 6 Thus the correct answer is Straight Line Depreciation = $ 3500000 8 Units of Production Method Depreciation = (cost - residual Value)/ Total no. of km* first year km. 9 = (23000000-5500000)/4450000*800000 10 = $ 3146067 11 Thus the correct answer is Unit of Production Depreciation = $ 3146067 IZ 13 Double decling method 14 Firstly we have to calculate the rate = (1/ life)*100*2 15 = (1/5)*100*2 16 = 40% 18 Double declining method depreciation = Cost *40% 19 =23000000*40% 20 = $ 9200000 21 Thus the correct answer is Double delcing method = $9200000 22 23 Requirement 2) Straight Line Method Units of Production Double declining Method 24 Carrying Amount 25 Cost 26 Less Accumulated Depreciation 27 Carrying Amount 23000000 3500000 19500000 23000000 3146067 19853933 23000000 9200000 13800000 /