Question

Delta Air Lines owns hundreds of aircraft, with about 60 percent of its fleet consisting of Boeing aircraft, while Airbus aircraft make up about 40 percent. It sold seven used Boeing 767-300 jets to Amazon.com as Amazon plans to expand its growing Amazon Air cargo service. The average age of the jets is about 20 years old. Assume the records of the company reflected the following for the jets that were sold: Aircraft cost $ 62,300,000 Accumulated depreciation $ 46,900,000 Required: 1. Prepare the journal entry for the disposal of the airplanes, assuming that the airplanes sold for: Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. a. $15,400,000 cash b. $16,700,000 cash c. $14,600,000 cash

Answer 1

The journal entries for the disposal of Delta Air Lines' Boeing 767-300 jets depend on the sale price. They include debits to cash and accumulated depreciation and credits to the aircraft account and either a gain or loss on the sale.

Step-by-step explanation:

When a company such as Delta Air Lines disposes of assets like aircraft, it must record the transaction in its accounting records with the appropriate journal entry. Here are the required journal entries for the disposal of the airplanes, given the different sale prices:

Aircraft cost: $62,300,000Accumulated depreciation: $46,900,000

Scenario a: Sold for $15,400,000 cash

Dr Cash $15,400,000

Dr Accumulated Depreciation $46,900,000

Cr Aircraft $62,300,000

Cr Gain/Loss on Sale of Asset $100,000 (Gain)

Scenario b: Sold for $16,700,000 cash

Dr Cash $16,700,000

Dr Accumulated Depreciation $46,900,000

Cr Aircraft $62,300,000

Cr Gain/Loss on Sale of Asset $1,300,000 (Gain)

Scenario c: Sold for $14,600,000 cash

Dr Cash $14,600,000

Dr Accumulated Depreciation $46,900,000

Cr Aircraft $62,300,000

Cr Gain/Loss on Sale of Asset -$700,000 (Loss)