Question

On January 1, 2018, Austin Airlines purchased a used airplane for $50,000,000. Austin Airlines expects the plane to remain useful for four years (4,000,000 miles) and to have a residual value of $6,000,000. The company expects the plane to be flown 1,500,000 miles the first year. Read the requirements. Requirement 1a. Compute Austin Airlines's first-year depreciation expense on the plane using the straight-line method. Begin by selecting the formula to calculate the company's first-year depreciation expense on the plane using the straight-line method. Then enter the amounts and calculate the depreciation for the first year. 1) = Straight-line depreciation Requirement 1b. Compute Austin Airlines's first-year depreciation expense on the plane using the units-of-production method. Before calculating the first-year depreciation expense on the plane using the units-of-production method, calculate the depreciation expense per unit. Select the formula, then enter the amounts and calculate the depreciation per unit. = Depreciation per unit Now, select the formula, enter the amounts, and calculate the company's first-year depreciation expense on the plane using the units-of-production method. = Units-of-production depreciation Requirement 1c. Compute Austin Airlines's first-year depreciation expense on the plane using the double-declining-balance method. Begin by selecting the formula to calculate the company's first-year depreciation expense on the plane using the double-declining-balance method. Then enter the amounts and calculate the depreciation expense for the first year. (Enter "O" for items with Double-declining- = balance depreciation Requirements J » Requirement 2. Show the airplane's book value at the end of the first year for all three methods. Straight-Line Units-of-production Double-declining-balance 1. Compute Austin Airlines's first-year depreciation expense on the plane using the following methods: a. Straight-line b. Units-of-production c. Double-declining-balance 2. Show the airplane's book value at the end of the first year for all three methods. Cost Less: Accumulated Depreciation Book Value Print Done

Answer 1

rate positively ..

requirement -1
			Computation of depreciable value
			Total cost		21000
		Less	Salvage value		3000
			Depreciable value		18000
			Depreciation for the year
	Date	Asset cost	Depreciable cost	Useful life	Depreciation expenses		Accumulated depreciation	Book value
	1-2-2018	21000
	12-31-2018		18000	4	4500		4500	16500
	12-31-2019		18000	4	4500		9000	12000
	12-31-2020		18000	4	4500		13500	7500
	12-31-2021		18000	4	4500		18000	3000
	Unit of production method
	Computation of depreciation expenses per unit
	Depreciation per unit = (Total cost - salvage value) / total unit
	Total mile =				6000
	Total cost	Salvage value	Total mile		Depreciation per unit
	21000	3000	6000		3.000
			Depreciation for the year
	Date	Asset cost	Depreciable per unit	Number of unit	Depreciation expenses		Accumulated depreciation	Book value
	1-2-2018	21000
	12-31-2018		3	600	1800		1800	19200
	12-31-2019		3	1800	5400		7200	13800
	12-31-2020		3	2400	7200		14400	6600
	12-31-2021		3	1200	3600		18000	3000
	Double declining method
	Depreciation rate = 2/4			50%
			Depreciation for the year
	Date	Asset cost	Book value	DDB rate	Depreciation expenses		Accumulated depreciation	Book value
	1-2-2018	21000
	12-31-2018		21000	50%	10500		10,500	10,500
	12-31-2019		10500	50%	5250		15,750	5,250
	12-31-2020		5250		2250		18,000	3,000
	12-31-2021		3000		0		18,000	3,000
requirement -2	Unit of production method tracks wear and tear most closely.