Posted: July 6th, 2016

Show the airplane’s book value at the end of the first year under the straight-line method??

Following Ratios computed in excel. Formulae provided:
Current Ratio
Acid-Test Ratio
Accts Rec Turnover
Inventory Turnover
Profit Margin
Asset Turnover
Return on Assets
Return on Common Shares
EPS
Price Earnings Ratio
Payout Ratio
Debt to Assets
Times Interest Earned

Question: At the beginning of the year, Orbit Airways purchased a used Boeing aircraft at a cost of $45 million. Orbit expects the plane to remain useful for five years (3 million miles) and to have a residual value of $5 million. Orbit expects the plane to be flown 750,000 miles the first year.

Using Excel:
1. Compute Orbit’s first-year depreciation on the plane using the following methods:
a. Straight-line
b. Units-of-production
c. Double-declining-balance
2. Show the airplane’s book value at the end of the first year under the straight-line method.