continuation of the EC9-3 exercise

.EC9-3 (p.511) - Calculation of the first year's depreciation (14 points)

At the beginning of the year, Logan Services purchased a used aircraft at $ 65,000,000. Logan expects the aircraft to remain useful for 4 years or 6,000,000 million miles and have a residual value of $ 5,000,000. The company expects the plane to fly 1,300,000 million miles in the first year.

Is required:

1. Calculate the depreciation of the first year for Logan on the airplane using the following methods.

Straight line

Production units

Double declining balance

Data item Amount

Cost of the plane $ 65,000,000

Less: estimated residual value 5,000,000

Depreciable cost $ 60,000,000

Estimated useful life

Years 4

Units 6,000,000 million miles

Straight line

Straight line depreciation = Depreciation for the year

Date Cost of asset Depreciation rate Depreciable cost Depreciation expense Accumulated depreciation Book value

12/31/2010 $ .25

Production units

Depreciation for the year

Date Cost of asset Depreciation rate per unit Number of units Depreciation expense Accumulated depreciation Book value

12/31/2010 $ 10

Double declining balance

SDD year 1 = (65,000,000 - 0) x 2/4 x 12/12

= 32,500,000 Bonus

Depreciation for the year

Date Cost of asset Rate SDD Value Depreciation expense Accumulated depreciation Book value

12/31/2010 .50

continuation of the EC9-3 exercise SDD year 1 (65,000,000-0) x 2/4 x 12/12 32,500,000 Bonus Depreciation for the year Date Cost of asset Rate SDD Value Depreciation expense Accumulated depreciation Book value 12/31/2010 50 2 Show the value in the books of the airplane, at the end of the first year with the method in a straight line Debit Credit Date Depreciation expenses (G+) Accumulated depreciation (DA +) Logan Services Assets Airplane Less Residual Value $ 5,000,000 Less accumulated depreciation $ 15,000,000 Total Value of Plane