Required information[The following information applies to the questions displayed below.]A recent annual report for Celtic Air Lines included the following note:NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESMaintenance CostsWe record maintenance costs related to our fleet in aircraft maintenance materials and outside repairs. Maintenance costsare expensed as incurred, except for costs incurred under power-by-the-hour contracts, which are expensed based onactual hours flown. Modifications that enhance the operating performance or extend the useful lives of airframes orengines are capitalized and amortized over the remaining estimated useful life of the asset or the remaining lease term,whichever is shorter.Assume that Celtic made extensive repairs on an airplane engine, increasing the fuel efficiency and extending the usefullife of the airplane. The existing airplane originally cost $4,500,000, and by the end of last year, it was half depreciatedbased on use of the straight-line method, a 20-year estimated useful life, and no residual value. During the current year,the following transactions related to the airplane were made:a. Ordinary repairs and maintenance expenditures for the year, $720,000 cash.b. Extensive and major repairs to the airplane's engine, $2,850,000 cash. These repairs were completed at the end of thecurrent year.c. Recorded depreciation for the current year.Required:1. Applying the policies of Celtic, complete the following, indicating the effects for the preceding expenditures. Indicate the effects byentering positive value for increase, negative value for decrease.AircraftAccumulatedDepreciationDepreciationExpenseRepairsExpenseCashBalance January 1$ 4,500,000$ 2,250,000a.b.C.Balance December 31

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Description: Required information[The following information applies to the questions displayed below.]A recent annual report for Celtic Air Lines included the following note:NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESMaintenance CostsWe record maintenance

Depreciation:Depreciation is an accounting method to reduce the value of tangible assets over its…

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Ordinary repairs and maintenance expenditures for the year, $720,000 cash. Extensive and major repairs to the airplane's engine, $2,850,000 cash. These repairs were completed at the end of the current year. Recorded depreciation for the current year.

Ordinary repairs and maintenance expenditures for the year, $720,000 cash. Extensive and major repairs to the airplane's engine, $2,850,000 cash. These repairs were completed at the end of the current year. Recorded depreciation for the current year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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