Question

A Celta Airline jet costs $28,000,000 and is expected to fly 200,000,000 miles during its 10 year life. Residual value is expected to be zero because the plane was used when it was acquired. If the plane travels 1,000,000 miles during the first year, how much depreciation should Celta Airline record under the units-of-production method?

Answer 1

depreciation expense 140,000 dollars

Step-by-step explanation:

Units of production will divide the cost of the jet over the total expected miles of the plain over his useful life:

`(cost)/(cost \: driver)`

$ 28,000,000 / 200,000,000 miles = 0.14 dollars per mile

We are going to multiply this rate over the miles flight this year.

$ 0.14 per mile x 1,000,000 miles= 140,000 dollars of depreciation