Assume that on September 30, 2010, LoganAir, the national airline of Switzerland, purchased an Airbus aircraft at a cost of €45,000,000 (€ is the symbol for the euro).
LoganAir expects the plane to remain useful for six years (4,500,000 miles) and to have a residual value of €5,400,000. LoganAir will fly the plane 410,000 miles during the remainder of 2010.
Compute LoganAir's depreciation on the plane for the year ended December 31, 2010, using the following methods:
a. Straight-line
b. Units-of-production
c. Double-declining-balance
Which method would produce the highest net income for 2010? Which method produces the lowest net income?