At the beginning of the year, Top Flight Airways purchased a used Boeing aircraft at acost of $80 million. Top Flight Airways expects the plane to remain useful for 10 years (10 million miles) and to have a residual value of $10 million. Top Flight Airways expects the plane to be flown 600,000 miles the first year and 1.3 million miles the second year.

Requirements

1. Compute Top Flight Airways’ first-year depreciation expense on the plane using the following methods:

a. Straight-line

b. Units-of-production

c. Double-declining-balance

2. Show the airplane’s book value at the end of the first year under the straight-line method.