United Trans Service jet costs $ 55.000.000 and is expected to fly 500.000.000 miles during its 8 -year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 50.000.000 miles the first year, how much depreciation should United Trans Service record under the units-of-production method? (Round the depreciation per unit to two decimal places.)

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Business

Giana Park

3 August, 19:17

United Trans Service jet costs $ 55.000.000 and is expected to fly 500.000.000 miles during its 8 -year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 50.000.000 miles the first year, how much depreciation should United Trans Service record under the units-of-production method? (Round the depreciation per unit to two decimal places.)

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Ryker Stephens · Answer 1

Depreciation for first year = $5,500.00

Explanation:

Cost of Jet = $55,000

It is expected to fly 500,000 miles in 8 years.

There is no salvage value.

Now, since the capacity in miles is provided the depreciation expense shall be based on such capacity only, that is units of production method and straight line method shall not be followed until specified.

Provided plane travels 50,000 miles in current year

Depreciation rate = $55,000/500,000 miles = $0.11 per mile

Depreciation for current year = $0.11 X 50,000 miles = $5,500.00