Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 9, Problem 9.3SE
1. (a)
To determine
Methods of
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.
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Computing first-year depreciation and book value
On January 1, 2018, Air Canadians purchased a used airplane for $37,000,000. Canadians expect the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1,400,000 miles during the first year.
Requirements
Compute Air Canadian’s first-year depreciation expense on the plane using the following methods:
Straight-line
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Show the airplane’s book value at the end of the first year for all three methods.
Computing first-year depreciation and book value
On January 1, 2018, Air Canadians purchased a used airplane for $37,000,000. Canadians expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1,400,000 miles during the first year.
Requirements
Compute Air Canadian’s first-year depreciation expense on the plane using the following methods:
a. Straight-line
b. Units-of-production
c. Double-declining-balance
Show the airplane’s book value at the end of the first year for all three methods.
Computing second-year depreciation and accumulated depreciation
On January 1, 2018, Advanced Airline purchased a used airplane at a cost of $60,500,000. Advanced Airline expects the plane to remain useful for eight years (5,000,000 miles) and to have a residual value of $5,500,000. Advanced Airline expects the plane to be flown 1,100,000 miles the first year and 1,200,000 miles the second year.
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Compute second-year (2019) depreciation expense on the plane using the following methods:
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Units-of-production
Double-declining-balance
2. Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods.
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
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