Question

eclive J-2 Wakilig a lump sum asset purchase Concord Pet Care Clinic paid $210,000 for a group purchase of land, building, a equipment. At the time of the acquisition, the land had a market value of $110,000, the building $88,000, and the equipment $22,000. Journalize the lump-sum purchase of the three assets for a total cost of $210,000, the amount for which the business signed a note payable. ctive 2 S9-3 Computing first-year depreciation and book value On January 1, 2018, Air Canadians purchased a used airplane for $37,000,000. Air Canadians expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1,400,000 miles during the first year. Requirements 1. Compute Air Canadians's first-year depreciation expense 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 first year for all three methods. S9-4 Computing second-year depreciation and accumulated depreciation On January 1, 2018, Advanced Airline purchased a used airplane at a cost of 60 500.000 Aduranced Airline expects the plane to remain useful for eight years we 2

Answer 1

$37,000,000 $5,000,000 Cost Residual Value Useful life Expected miles 40,00,000 Ans la Straight Line Depreciation = (Cost - Salvage Value)/Useful life Straight Line Depreciation = ($37,000,000 - $5,000,000)/5 Straight Line Depreciation = $7,300,000 Straight Line depreciation for first year is $7,300,000 Ans 1b Unit of Production = (Cost - Salvage Value Estimated unit of production x unit produced Unit of Production = (($37,000,000 - $5,000,000)/4,000,000) x 1,400,000 Unit of Production = $12,775,000 Unit of Production depreciation for first year is $12,775,000 Ans 1c Double Declining Balance method = 2/useful life x book value Double Declining Balance method = 2/5 x $37,000,000 Double Declining Balance method = $14,800,000 Ans 2 Straight Line Double Unit of Declining Production Balance method $37,000,000 $37,000,000 $12,775,000 -$14,800,000 Cost $37,000,000 $7,300,000 Less:Depreciation Book Value at the end of first year $29,700,000 $24,225,000 $22,200,000