Chapter 17.I, Problem 3TIE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Kelowna Air Service bought a small commuter airplane for $386,000. It is expected to have a useful life of 4 years and a trade-in value of $70,000. Prepare a depreciation schedule for the airplane by using the

To determine

**To calculate:** The depreciation schedule for Kelowna Air Service using 150% declining balance method when the total cost of small airplane is

Explanation

**Given Information:**

The total cost of small airplane is

**Formula used:**

The steps to prepare depreciation schedule by the declining balance method are as follows:

Step 1: Calculate the declining balance rate by the below formula

Step 2: Calculate the depreciation for each year by multiplying beginning book value by declining balance rate as:

Step 3: Calculate the ending book value by subtracting depreciation of the year from the beginning book value as:

Step 4: The depreciation is complete when the ending book value equals the salvage value.

Step 5: Prepare the depreciation schedule in form of chart.

**Calculation:**

Consider the total cost of small airplane is

The declining-balance rate is:

Now, using the above formula, the declining-balance rate is:

The depreciation for the year is:

Now, using the above formula, the depreciation for 1^{st} year is:

The ending book value is:

Now, using the above formula, the ending book value for 1^{st} year is:

Now, using the above formula, the depreciation for 2^{nd} year is:

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