please The 6. Northeast Airlines purchased a 747 aircraft on January 1, 2011, at
ID: 2519051 • Letter: P
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please
The 6. Northeast Airlines purchased a 747 aircraft on January 1, 2011, at a cost of $35,000,000. estimated useful life of the aircraft is 20 years, with an estimated salvage value of $5,000,000. On January 1, 2014 the airline revises the total estimated useful life to 15 years with a revised salvage value of $3,500,000. Instructions (a) Compute the depreciation and book value at December 31, 2013 using the straight-line method straight-line method is used, compute the depreciation expense for the year ended and the double-declining-balance method. December 31.2014Explanation / Answer
Answer to Part a.
Straight Line Depreciation per year = (Cost – Salvage Value) / Useful Life
Straight Line Depreciation per year = (35,000,000 – 5,000,000) / 20
Straight Line Depreciation per year = 30,000,000 / 20
Straight Line Depreciation per year = $1,500,000
Book Value, December 31, 2013 = Cost – Accumulated Depreciation on December 31, 2013
Accumulated Depreciation on December 31, 2013 = Depreciation per year * 3
Accumulated Depreciation on December 31, 2013 = $1,500,000 * 3
Accumulated Depreciation on December 31, 2013 = $4,500,000
Book Value, December 31, 2013 = $35,000,000 - $4,500,000
Book Value, December 31, 2013 = $30,500,000
Answer to Part b.
Revised Depreciation = (Book Value on the date of Change – Revised Salvage Value) / Remaining Life
Remaining Life = 15 – 3 = 12 years
Revised Depreciation = (30,500,000 – 3,500,000) / 12
Revised Depreciation = $2,250,000
Therefore, Depreciation expense for the year ended December 31, 2014 is $2,250,000.
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