On 1 January 2021 Aeroflot Co purchased a Boeing 737 (on credit) for $50,000,000. The plane was expected to have a life of 300,000,000 kilometers over a five-year period.

Its estimated residual value is $4,000,000. The distances travelled were expected to be:

Year Kilometers

20X1 70,000,000

20X2 70,000,000

20X3 50,000,000

20X4 50,000,000

20X5 60,000,000

300,000,000

Required:

a) Calculate depreciation for the year ended 31 December 2021 according to the following methods:

• straight-line

• units of production

• reducing-balance at a depreciation rate of 30%

b) Assume the reducing-balance method was adopted and the Boeing 737 was sold on 1 Jan 2023 for $30,000,000.

Show the journal entries for

i) the aircraft purchase in 1 Jan 2021

ii) depreciation on 31 Dec 2021 and 31 Dec 2022

iii) the sale on 1 Jan 2023

Answer rating: 100% (QA)

Calculation of cost of asset for the purpose of depreciation Plane 50000000 Total cost 50000000 1 St... View the full answer