Question

your answer is incorrect. Kingbird, Inc. purchased a 777 aircraft on January 1, 2022 at a cost of $40,800,000. The estimated useful life of the aircraft is 20 years, with an estimated salvage value of $6,120,000. Compute the accumulated depreciation and book value at December 31, 2022 using the straight-line method and the double- declining balance method. Straight-line Accumulated depreciation 1734000 Declining-balance $ 4080000 $ 36720000 Book value 39066000

Answer 1

Ans :

Depreciation under SLM method:

Depreciation expense = (C-S) / L

C = Cost of the asset = $ 40,800,000.

S = Salvage value = $ 6,120,000.

L = Life of the asset = 20 years

Substitute all the above data in the formula.

Depreciation expense = (C-S) / L

Annual Depreciation expense = ($ 40,800,000 - $ 6,120,000) / 20

= $ 34,680,000 / 20

= $ 1,734,000

Book value = Cost - accumulated depreciation

= $ 40,800,000 - $ 1,734,000

= $ 39,066,000.

(2)  Depreciation under double declining method,

Depreciation expense = (C) / L *2

C = Cost of the asset = $ 40,800,000

L = Life of the asset = 20 years

Depreciation expense = $ 40,800,000 / 20 * 2 = $ 4.080,000

Accumulated depreciation = $ 4.080,000

Book value = Cost - Accumulated depreciation

= $ 40,800,000 - $ 4,080,000

= $ 36,720,000