Selecting the best depreciation method for tax purposes [10 min]
This exercise uses the Alaska Freight Airlines data from Short Exercise Alaska Freight Airlines is deciding which depreciation method to use for income tax purposes.
Requirements
1. Which depreciation method offers the tax advantage for the first year? Describe the nature of the tax advantage.
2. How much extra depreciation will Alaska Freight Airlines get to deduct for the first year as compared with the straight-line method?
Computing first-year depreciation and book value [10 min]
At the beginning of the year, Alaska Freight Airlines purchased a used airplane for $43,000,000. Alaska Freight Airlines expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $7,000,000. The company expects the plane to be flown 1,400,000 miles the first year.
Requirements
1. Compute Alaska Freight Airlines’ first-year depreciation 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 under the straight-line method.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.