Question

2. Prairie Airlines purchased a 747 aircraft on January 1, 2016, at a cost of $30,000,000. The estimated useful life of the aircraft is 20 years, with an estimated residual value of $4,000,000. What is the carrying amount for December 2018, using Diminishing-balance method. Carrying Amt Depreciation Annual Accumulated Carrying Year Beginning Yr Rate Depreciation Depreciation

Answer 1

We need to calculate the depreciation rate for Diminishing-balance method:

Depreciation rate = 2 / Useful life

Depreciation rate = 2 / 20 = 0.10

Now, we can calculate the carrying amount and accumulated depreciation for December 2018:

Year 1:

Beginning Carrying Amount = $30,000,000

Depreciation Expense = $30,000,000 x 0.10 = $3,000,000

Accumulated Depreciation = $3,000,000

Year 2:

Beginning Carrying Amount = $27,000,000 ($30,000,000 - $3,000,000)

Depreciation Expense = $27,000,000 x 0.10 = $2,700,000

Accumulated Depreciation = $3,000,000 + $2,700,000 = $5,700,000

Year 3 (December 2018):

Beginning Carrying Amount = $24,300,000 ($27,000,000 - $2,700,000)

Depreciation Expense = $24,300,000 x 0.10 = $2,430,000

Accumulated Depreciation = $5,700,000 + $2,430,000 = $8,130,000

Therefore, the carrying amount for December 2018 is $24,300,000 and the accumulated depreciation is $8,130,000.