A Reality Byte Carnival Cruise Lines Depreciation Exercise The Carnival Dream Carnival Cruise Lines is a major player in the cruise industry, with 98 passenger ships and 2010 revenues of $14.4 billon. Total assets for 2010 were 37.5 billion, of which S30.9 billion (82%) represented property and equipment. In the spring of 2011 Carnival introduced one of its newest ships, the Carnival Magic, which carries 1,750 passengers and cost $740 million to build. The first sailing of the Carnival Magic was on May 1,2011 Summary information from the Company's Annual Report is as follows: Property and Equipment is stated at cost. Depreciation and amortization is computed using the straight line method over estimated useful lives as follows: Assume that as a new ship, the Carnival Magic will be assigned a useful life of 30 years and a salvage value of $110 million ( 15%). Required: 1. For purposes of this problem, ignore the fact that the Carnival Magic did not sail until May 1, 2011. Calculate a full year's depreciation expense for the Carnival Magic for 2011, 2012, 2013. 2014 and 2015 using: AStraight-line depreciation Double-declining balance depreciation c Sum of the year's digits depreciation 2. Calculate depreciation expense for 2011 for the Carnival Magic assuming straight-line depreciation and each of the following A Depreciation is calculated to nearest day a Depreciation is done monthly and begins in the month the acquisition took place acquisition. c Depreciation is calculated to the nearest month: that is assets placed in service from the 1t to the 15th are treated as if purchased at the beginning of the month o Half of a full year's depreciation is taken in the year of acquisition