Reference no: EM132919769

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

1 February 2012 - 31 January 2019 2800

1 February 2013 - 31 January 2020 2300

1 February 2014 - 31 January 2021 500

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).

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.