Question

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?

Answer 1

Answer:

$140,000

Explanation:

The computation of the depreciation per units or bolts under the units-of-production method is shown below:

= (Original cost - residual value) ÷ (estimated miles)

= ($28,000,000 - $0) ÷ ( 200,000,000 miles)

= ($28,000,000) ÷ (200,000,000 miles)

= $0.14 per mile

Now for the first year, it would be

= Estimated miles in one year × depreciation per miles

= 1,000,000 × $0.14

= $140,000