On January 1,

2017,

Alaska Freight

Transportation Company purchased a used aircraft at a cost of

$55,400,000.

Alaska Freight

expects the plane to remain useful for

five

years

(6,500,000

miles) and to have a residual value of

$5,400,000.

Alaska Freight

expects to fly the plane

825,000

miles the first year,

1,225,000

miles each year during the second, third, and fourth years, and

2,000,000

miles the last year.Read the requirements

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Part 1

1. Compute

Alaska Freight's

depreciation for the first two years on the plane using the straight-line method, the units-of-production method, and the double-declining balance method.

a. Straight-line method

Using the straight-line method, depreciation is $

10,000,000

for 2017 and $

10,000,000

for 2018.

Part 2

b. Units-of-production method (Round the depreciation per unit of output to two decimal places to compute your final answers.)

Using the units-of-production method, depreciation is $

6,344,250

for 2017 and $

9,420,250

for 2018.

Part 3

c. Double-declining balance method

Using the double-declining-balance method, depreciation is $

22,160,000

for 2017 and $

13,296,000

for 2018.

Part 4

2. Show the airplane's book value at the end of the first year under each method.

Book Value:		Straight-Line
Less:
Book Value