On April 30, 2017, Whispering Winds Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2017. Overall, the cost of the ship was $96 million, with an estimated useful life of 12 years and residual value of $30 million. Whispering Winds expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits:

Part

Cost

Useful life

Residual value

Pattern of benefits

Total output (nautical miles)

Engines (6)

$945,000

per engine

8

years

$120,000

per engine

Varies with activity

6 million

Hull

$3,850,000

10

years

$500,000

Highest in early years

7.50 million

Body

$86.48

million

15

years

$15.90

million

Evenly over life of body

12.50 million

The ships first voyage took place on August 1, 2017. The ship sailed a total of 324,000 nautical miles in 2017. Whispering Winds prepares financial statements in accordance with IFRS.

Journal entry to record the purchase of the ship, assuming that Whispering Winds paid cash for the purchase.

Prepare the journal entries to record depreciation expense for 2017.

Date Account Titles and Explanation Debit Credit June 30, 2017T Ships Engines 5670000 Ships Hul 3850000 Ships Body 86480000 Cash 96000000 Date Account Titles and Explanation Debit Credit December 31, 2017 (To record depreciation on Ship-Engines) December 31, 2017 (To record depreciation on Ship-Hull) December 31, 2017 (To record depreciation on Ship-Body)