Homework Answers
a) Straight Line Method
Depreciation =[ Actual Cost of aircraft- Residual Value] / Useful life of air craft
=$ (44,300,000 - 4300000 )/5
= $ 8,000,000 every year.
b) Units of production method
Depreciation = Actual Cost of aircraft X No. of miles traveled this year / Total Number of expected miles during all the years.
Depreciation for 1st year = 44,300,000 * 725,000/5,500,000
= $ 5,839,545
Depreciation for 2nd year = 44,300,000 * 1,225,000/5,500,000
= $ 9,866,818
c) Double Declining method
Depreciation rate user SLM = 8,000,000/ 44300000× 100
= 18.06%
Double declining rate of depreciation = 2× 18.06%
=36.12%
Depreciation for first year
$44,300,000×36.12% = $16,001,160
Depreciation for 2nd year = Book value at beginning of year × Depreciation rate
Book value at beginning of the year = $44,300,000 - 16,001,160 =$ 28,298,840
Depreciation for 2nd year
= $ 28,298,840 × 36.12%
= $ 10,221,541
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