Question

Upper A Celty Airline jet costs $ 28 comma 000 comma 000 and is expected to fly 200 comma 000 comma 000 miles during its 10​-year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 1 comma 000 comma 000 miles the first​ year, how much depreciation should Celty Airline record under the​ units-of-production method? ​(Round the depreciation per unit to two decimal​ places.)

Answer 1

$140,000

Step-by-step explanation:

Cost = $28,000,000

Residual value = $0

Expected miles = 200,000,000

Flying miles (year 1) = 1,000,000

Now,

Depreciation per hour =
`(Cost-Residual Value)/(Expected miles)`

Depreciation per hour =
`(28,000,000 - 0)/(200,000,000)`

Depreciation per hour =
`(28,000,000)/(200,000,000)`

Depreciation per hour = $0.14

Depreciation expense (year 1) = Depreciation per hour × Working hours (year 1)

Depreciation expense (year 1) = $0.14 × 1,000,000

Depreciation expense (year 1) = $140,000