On January 1, 2018, South Bend Airlines purchased a used airplane for $53,600,000. South Bend Airlines expects the plane to remain useful for four years (6,000,000 miles) and to have a residual value of $5,600,000. The company expects the plane to be flown 1,100,000 miles the first year.
Requirement 1a | ||||||
Straight line method. | ||||||
Depreciation per year = (Purchase cost - Salvage Value)/Useful Life | ||||||
(5,36,00,000 - 56,00,000)/4 | ||||||
1,20,00,000 | ||||||
Requirement 1b | ||||||
Units of production method | ||||||
Depreciation per miles = (Purchase cost - Salvage Value)/Expected miles over the period | ||||||
(5,36,00,000 - 56,00,000)/60,00,000 | ||||||
$ 8 | ||||||
First year depreciation = 1,100,000 miles * $ 8 = | 88,00,000 | |||||
Requirement 1C | ||||||
Cost = 53,600,000 | ||||||
Useful life = 4 years | ||||||
SLM Rate = 25% | ||||||
double declining rate = 50% | ||||||
Ist year depreciation = 5,36,00,000 * 50% | ||||||
2,68,00,000 | ||||||
Requirement 2 | ||||||
end of period | ||||||
Method | SLM | Units of pro | Double declining | |||
Cost | 5,36,00,000 | 5,36,00,000 | 5,36,00,000 | |||
Less: Accumulated Depreciation | 1,20,00,000 | 88,00,000 | 2,68,00,000 | |||
Book Value | 4,16,00,000 | 4,48,00,000 | 2,68,00,000 |
On January 1, 2018, South Bend Airlines purchased a used airplane for $53,600,000. South Bend Airlines...
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