Chapter 9, Problem 9.3SE

1.

(a)

To determine

Methods of Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life.

The three methods of depreciation are:

• Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.
• Units-of-production method: In this method of depreciation, the amount of depreciation is charged based on the unit of production each year.
• Double-declining balance method: In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.

To Compute: the amount of depreciation for the first year for A Company under the straight-line method

(b)

To determine

To Compute: the amount of first-year depreciation under the units-of- production method.

(c)

To determine

To Compute: the amount of first-year depreciation under the double-declining-balance method.

2.

To determine

To Show: the book value of the airplane of A Company under the three methods.