3. At the beginning of the year, Logan Services purchased a used airplane for $6

Question

3. At the beginning of the year, Logan Services purchased a used airplane for $65,000,000. Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1.3 million miles the first year. Requirements R1. Compute Logan Services’ first-year depreciation on the plane using the following methods: a. Straight-line, b. Units-of-production, c. Double-declining-balance. R2. Show the airplane’s book value at the end of the first year under the straight-line method.

Explanation / Answer

SLM Cost of Machine       65,000,000.00 Salvage Value          5,000,000.00 Life in years                          4.00 Particulars Year1 Opening Balance       65,000,000.00 Depreciation(65,000,000-5,000,000)/4       15,000,000.00 Closing balance       50,000,000.00 Life   4 Years Double decling balance method rate = 25%*2 50% Particulars Year1 Opening Balance       65,000,000.00 Depreciation@50%       32,500,000.00 Closing balance       32,500,000.00 Units of production Cost of Machine       65,000,000.00 Salvage Value          5,000,000.00 Life in Units          6,000,000.00 Particulars Year1 Opening Balance       65,000,000.00 Units of production          1,300,000.00 Depreciation(1,300,000/6,000,000)*(65m-5m)       13,000,000.00 Closing balance       52,000,000.00

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.