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At the beginning of the year, Hope We Land Airlines purchased a used airplane for $32,740,000.
Hope We Land Airlines expects the plane to remain useful for 5 years, or 3,900,000 miles and to have a residual value of $5,700,000.
The company expects the plane to be flown 1,130,000 during the first year.
Note: When inputting a percentage value, do not include the % symbol, and round your answer to two decimal places (e.g., 50.35).
1. Compute Hope We Land Airlines first-year depreciation expense on the plane using the following methods:
a. Straight-line Method = `(` Cost-Residual Value`)` `/` Time = Depreciation Per Year
Straight-line Method = `(` `-` `)` `/` `(` `)` `=` $ per year
b. Units of Production = `(` Cost-Residual Value`)` `/` Usage = Depreciation Per Unit
Straight-line Method = `(` `-` `)` `/` `(` `)` `=` $ per unit
Depreciation per Unit `*` Miles `=` Depreciation
X =
c. Double-declining balance
1 `/` `(` # of years`)` `=` Percent of Straight Line Depreciation
1 / = `%`
2 X Percent of Straight Line Depreciation = Percent of Double Declining Depreciation
2 X `%` `=` `%`
Percent of Double Declining Depreciation X Cost `=` Depreciation
`%` X $ `=` $
2. Show the airplane’s book value at the end of the first year for all three methods.
Account | Straight-line | Units-of-production | Double-declining-balance |
---|---|---|---|
Cost | |||
Less: Accumulated Depreciation | |||
Book Value |
Account | Straight-line | Units-of-production | Double-declining-balance |
---|---|---|---|
Cost | 32,740,000.00 | 32,740,000.00 | 32,740,000.00 |
Less: Accumulated Depreciation | 5,408,000.00 | 7,834,666.67 | 13,096,000.00 |
Book Value | 27,332,000.00 | 24,905,333.33 | 19,644,000.00 |