A British Tran jet costs $ 42,000,000 and is expected to fly 350,000,000 miles during its 12 -year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 52,000,000 miles the first year, how much depreciation should British Tran record under the units-of-production method?

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28 August, 07:09

A British Tran jet costs $ 42,000,000 and is expected to fly 350,000,000 miles during its 12 -year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 52,000,000 miles the first year, how much depreciation should British Tran record under the units-of-production method?

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Caitlin Bean · Answer 1

Annual depreciation = $6,240,000

Explanation:

Giving the following information:

Purchasing cost = $42,000,000

It is expected to fly 350,000,000 miles.

The plane travels 52,000,000 miles the first year

Using the units of production method, we need to use the following formula for each year:

Annual depreciation = [ (original cost - salvage value) / useful life of production in miles]*miles travelled

Annual depreciation = (42,000,000 / 350,000,000) * 52,000,000

Annual depreciation = $6,240,000