Question
The 2011 annual report of Alaska Airlines contained the following footnote: PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment are recorded at cost and depreciated using
The 2011 annual report of Alaska Airlines contained the following footnote:
PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which are as follows:
Aircraft and related flight equipment 15-20 years
Buildings 25-30 years
Capitalized leases & leasehold improvements Shorter of lease term or estimated useful life
Minor building and land improvements 10 years
Computer hardware and software 3-5 years
Other furniture and equipment 5-10 years
Consider a Boeing 737-100 airplane that Alaska required for $50 million. Its useful life is 20 years, and its expected residual value is $6 million. Prepare a tabular comparison of the annual depreciation and book value for each of the first three years of service life under straight-line and DDB depreciation. Show all amounts in thousands of dollars (rounded to the nearest thousand). (Note that this is a caparison of methods for reporting to shareholders.
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