Accounting Depreciation and Book Value

[Stat1]

Please help me!

At the beginning of the year, Logan Services purchased a used airplane for $65,000,000. Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1.3 million miles the first year.

1. Compute Logan Services’ first year depreciation on the plane using the following methods:
a) Straight-Line
b) Units-of-production

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

 

[Deleted member 4993]

Please help me!

At the beginning of the year, Logan Services purchased a used airplane for $65,000,000. Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1.3 million miles the first year.

1. Compute Logan Services’ first year depreciation on the plane using the following methods:
a) Straight-Line
b) Units-of-production

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

Can you define the terms involved (e.g. depreciation, book value,the straight-line method, residual value, etc.)?

What equations do you know of "relating" those terms?

 

[Stat1]

Depreciation - The allocation of a plant asset's cost to expense over its useful life
Straight-line method - allocated an equal amount of depreciation to each year.
Straight line depreciation = (Cost-Residual Value) * (1/life) * (#/12) ... # represents the number of months used in a year
Estimated residual value - is the assest's expected cash value at the end of its useful life.
Units-ofproduction method allocates a fixed amount of depreciation to each unit of output.
Units-of-production depreciation per unit of output = (Cost-Residual value) * (1/life in units)