Reference no: EM132924242

Question - An airline company bought and put into operation a jet aircraft on 1 February 2017 for $7 000 000. The expectation then was that the aircraft would be flown for a total of 10 000 hours over a period of 4 years and then traded in for a new model. The trade-in value was expected to be $1 500 000 at the end of January 2021. The number of flying hours actually logged by the aircraft was as follows:

1 February 2011 - 31 January 2018 : 3000 hours

1 February 2012 - 31 January 2019 : 2800 hours

1 February 2013 - 31 January 2020 : 2300 hours

1 February 2014 - 31 January 2021 : 500 hours

The aircraft had a serious accident in June 2020 and was a total write-off; although an insurance company agreed to pay $1 200 000 in settlement.

REQUIRED -

a. Calculate the depreciation charges for each of the four financial years to 31 January 2021

i. Using the straight line basis (applied on a full year basis) and

ii. On a basis of flying hours logged.

b. Show the appropriate ledger accounts for the year ended 31 January 2021 for the first method.