In August 2016, Heavy-lift Helicopters Ltd. purchased a new helicopter for its l
ID: 2400329 • Letter: I
Question
In August 2016, Heavy-lift Helicopters Ltd. purchased a new helicopter for its logging and heavy lift operations at a cost of $1.2 million. Based on past experience, management has determined that the helicopter will have a useful life of 14,000 flying hours, at which time it will have an estimated residual value of $150,000. During 2016, the helicopter was used for 1,400 flying hours and in 2017 it was used for 1,650 flying hours. Heavy-lift Helicopters has a December 31 year end and uses the units-of-production method of depreciation for its helicopters.
Required
Determine the depreciation expense on this helicopter for 2017 and its carrying amount at December 31, 2017.
Explanation / Answer
Depreciation calculation per flying
A
Cost
$ 1,200,000.00
B
Residual Value
$ 150,000.00
C=A - B
Depreciable base
$ 1,050,000.00
D
Usage
14000
E
Depreciation per Flying Hour
75
Year
Book Value
Usage
Depreciation expense
Ending Book Value
Accumulated Depreciation
2016
$ 1,200,000.00
1400
$ 105,000.00
$ 1,095,000.00
$ 105,000.00
2017
$ 1,095,000.00
1650
$ 123,750.00
$ 971,250.00
$ 228,750.00
Depreciation expenses for December 2017
$ 123,750.00
Carrying value of Helicopter on December 2017
$ 971,250.00
A
Cost
$ 1,200,000.00
B
Residual Value
$ 150,000.00
C=A - B
Depreciable base
$ 1,050,000.00
D
Usage
14000
E
Depreciation per Flying Hour
75