On January 1, 2017, AmerEx Transportation Company purchased a used aircraft at a cost of $64,400,000. AmerEx expects the plane to remain useful for five years (7,000,000 miles) and to have a residual value of S6,400,000. AmerEx expects to fly the plane 775,000 miles the first year, 1,200,000 miles each year during the second, third, and fourth years, and 2.625,000 miles the last year. (Click the icon to view the first year depreciation amounts under each method.) Read the requirements. 1. Which depreciation method offers the highest tax advantage for the first year? Describe the nature of the tax advantage. The double-declining balance method offers the tax advantage for the first year of the asset's use. i Requirements The advantage results from the greater amount of depreciation (versus the other methods) in the first year. greater leaser Assume AmerEx is trying to decide which depreciation method to use for income tax purposes. The company can choose from among the following methods: (a) straight-line. (b) units-of-production, or (c) double-declining-balance methods. 1. Which depreciation method offers the highest tax advantage for the first year? Describe the nature of the tax advantage. 2. How much income tax will AmerEx save for the first year of the airplane's use under the method you just selected as compared with using the straight-line depreciation method? The company's income tax rate is 32%. Ignore any earnings from investing the extra cash. Print Done Click to select your answers) and then click Check