Try another version of this question At the beginning of 2019, Propeller Air Service purchased a used airplane at a cost of $39,310,000.
Note: When inputting a percentage value, do not include the % symbol, and round your answer to two decimal places (e.g., 50.35).
Propeller Air Service expects the plane to remain useful for 6 years, or 10,630,000 miles and to have a residual value of $5,040,000.
The company expects the plane to be flown 1,140,000 miles during the first year and 1,310,000 miles the second year.
1. Compute second-year (2020) depreciation expense on the plane using the following methods:
a. Straight-line
Cost `-` Residual Value `/` Time = Depreciation Per year
`-` `/` =
b. Units of Production
Cost `-` Residual Value `/` Usage = Depreciation Per unit
`-` `/` =
Year 1 Depreciation per Unit X Miles = Depreciation
Year 1 X =
Year 2 Depreciation per Unit X Miles = Depreciation
Year 2 X =
c. Double-decling balance
1`/`(# of years) = Percent of Straight Line Depreciation
2 X Percent of Straight Line Depreciation = Percent of Double Declining Depreciation
1`/` = %
2 X = %
Year 1 Percent of Double Declining Depreciation `*` Cost = Depreciation
Year 1 % X =
Year 2 Cost - Depreciation * Percent of Double Declining Depreciation = Depreciation
Year 2 `-` X =
2. Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods. Straight-line Units-of production Double-declining-balance Depreciation Expense - Year 1 Depreciation Expense - Year 2 Total Accumulated Depreciation
Straight-line Units-of production Double-declining-balance Depreciation Expense - Year 1 5,711,666.67 3,675,239.89 13,103,333.33 Depreciation Expense - Year 2 5,711,666.67 4,223,301.98 8,735,555.56 Total Accumulated Depreciation 11,423,333.33 7,898,541.86 21,838,888.89