Prof.Dr. Taylan ALTINTA Vanuatu Airline Company-1 On January 1, 2016, Vanuatu Airline Company purchases an airplane...

 

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Prof.Dr. Taylan ALTINTAŞ Vanuatu Airline Company-1 On January 1, 2016, Vanuatu Airline Company purchases an airplane for $18,000,000 to use it in its operations. The Chief Financial Officer of the company considers the alternatives of the depreciation methods. The estimated useful life of the plane ise 10 years. The residual value of the airplane at the end of the useful life is expected as $10,000,000. The estimated units of useful life is miles. Miles to be flown each year are given below: Year 23456789 10 TOTAL Yearly Flight (in miles) 680,000 720,000 710,000 720,000 690,000 630,000 610.000 590,000 540,000 510,000 6,400,000 Required: a) Compute the depreciation expense for each year, the accumulated depreciation and the net book value of the airplane as of the end of each year for each depreciation method. Which depreciation method should be chosen for what reason? b) Assume that Vanuatu Airline Company decides to sell the airplane at the end of the 3. year for $11,000,000. Make the journal entry under each depreciation method. Prof.Dr. Taylan ALTINTAŞ Vanuatu Airline Company-1 On January 1, 2016, Vanuatu Airline Company purchases an airplane for $18,000,000 to use it in its operations. The Chief Financial Officer of the company considers the alternatives of the depreciation methods. The estimated useful life of the plane ise 10 years. The residual value of the airplane at the end of the useful life is expected as $10,000,000. The estimated units of useful life is miles. Miles to be flown each year are given below: Year 23456789 10 TOTAL Yearly Flight (in miles) 680,000 720,000 710,000 720,000 690,000 630,000 610.000 590,000 540,000 510,000 6,400,000 Required: a) Compute the depreciation expense for each year, the accumulated depreciation and the net book value of the airplane as of the end of each year for each depreciation method. Which depreciation method should be chosen for what reason? b) Assume that Vanuatu Airline Company decides to sell the airplane at the end of the 3. year for $11,000,000. Make the journal entry under each depreciation method.