At the beginning of the year Texas aeros purchased a used airplane for $59,500,0

Question

At the beginning of the year Texas aeros purchased a used airplane for $59,500,000. texas aeros expects The plane to remain useful for 4 years and to have a residential value of $4,500,000. The company expects the plane to be flown 1,200,00 miles the first year

This Question: 8 pts of the year, Texas Aeros purchased a used airplane for 59 500,000 Texas Aeros expects the plane to remain useful for four years (5,000,000 miles) and to have a residual value of $4,500,000. The company expects the plane to be flown 1,200,000 miles the first year Read the r Requirement 1a. Compute Texas Aeros's first year depreciation exp Begin by selecting the formula to calculate the company's first-year d O Requirements calculate the depreciation for the first year Cost 1. Compute Texas Aeros's first year depreciation expense on the plane using the following methods: 59500000 Requirement 1b. Compute Texas Aeros's first- year depreciation exp Before calculating the first-year depreciation expense on the plane u a. Straight-ine 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 muda, then enter thunts and caiculate the deprecdation p unit Current year usage Print Done Now. select the formula, enter the amounts, and caliculate the company's first-year depreciation expense on the plane using the units-of-production method. Choose trom any list or enter any number in the input telds and then continue to the next question

Explanation / Answer

1)

a) Straight line:

Cost of Airplane = 59,500,000

Remaining useful life = 4 years

Residual value = 4500000

Straight line depreciation = (59500000 - 4500000)/4 = 13750000

b) Units of Production:

Cost of Airplane = 59,500,000

Residual value = 4500000

Expected miles to be flown in 1st year = 120000

Total miles to be flown = 500000

Depreciation Expense = (59500000 - 4500000)/500000 *120000 = 13200000

c) Double declining Balance:

Rate of depreciation = 100/4 = 25%

Double declining rate = 25%*2 = 50%

Depreciation expense = 59500000*50%= 29750000

2)

Airplane book value at the end of first year (straight line) = 59500000 - 13750000 = 45750000

Airplane book value at the end of first year (units of production) = 59500000 - 13200000 = 46300000

Airplane book value at the end of first year(Double declining) = 59500000 - 29750000 = 29750000

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