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On January 1, 20X4, JetBlue purchased an airplane for $25,000,000. JetBlue expects the plane to remain useful for 5 years and to have a residual value of $5,000,000. JetBlue uses the straight-line method to depreciate its airplanes. JetBlue flew the plane for 4 years and sold it on January 1, 20X8, for $8,000,000. 1. Compute accumulated depreciation on the airplane

On January 1, 20X4, JetBlue purchased an airplane for $25,000,000. JetBlue expects the plane to remain useful for 5 years and to have a residual value of $5,000,000. JetBlue uses the straight-line method to depreciate its airplanes. JetBlue flew the plane for 4 years and sold it on January 1, 20X8, for $8,000,000.

1. Compute accumulated depreciation on the airplane at January 1, 20X8 (same as Decembere 31, 20X7).

2. Record the sale of the plane on January 1, 20X8.

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Related Book For answer-question
Financial Accounting

Financial Accounting

7th edition

Authors: Walter T. Harrison, Charles T. Horngren

ISBN: 978-0135012840

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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