(Learning Objective 2: Computing depreciation by three methods—fi rst year only)

Assume that at the beginning of 20X6, AirAsia, a regional airline operating predominantly in Southeast Asia, purchased a used Boeing 737 aircraft at a cost of $53,000,000. AirAsia expects the plane to remain useful for fi ve years (6 million miles) and to have a residual value of

$5,000,000. AirAsia expects to fl y the plane 775,000 miles the fi rst year, 1,275,000 miles each year during the second, third, and fourth years, and 1,400,000 miles the last year.

1. Compute AirAsia’s fi rst-year depreciation 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 fi rst year under each depreciation method.