Chapter 9, Problem 9.4SE

Computing second-year depreciation and accumulated depreciation

At the beginning of 2016, Air Asia purchased a used airplane at a cost of $40,000,000. Air Asia expects the plane to remain useful for eight years (5,000,000 miles) and to have a residual value of $5,000,000. Air Asia expects the plane to be flown 1,200,000 miles the first year and 1,400,000 miles the second year.

Requirements

 1. Compute second-year (2017) depreciation expense on the p lane using the following methods:

a. Straight-line

b. Units-of-production

c. Double- declining-balance

2. Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods.