Depreciation at Delta & Singapore Airlines

Financial Accounting

Depreciation at Delta Airlines & Singapore Airlines
(Solution to Case #2)
24th November, 2009

1. Calculate the annual depreciation expense that Delta and Singapore would record for each $100 gross value of aircraft.

  a. Delta:
  i. Prior to July 1, 1986 the Delta airline assets were depreciated using Straight Line Method at 10% for 10 years for a salvage value of 10%.
          Depreciation Expense = (Cost of Asset – Salvage Value) / number of year
          Depreciation Expense = (100.00 – 10.00) / 10 =
          9 dollars for every 100 dollars of airline equipment

  ii. From July 1, 1986 to March 31, 1993 the depreciation was Straight line at 10% for 15 years for a salvage value of 10%. Therefore
          Depreciation Expense = (Cost of Asset – Salvage Value) / number of year
          Depreciation Expense = (100.00 – 10.00) / 15=
          6 dollars for every 100 dollars of airline equipment

iii. After April 1, 1993 depreciation was at 5% salvage value for 20 years
          Depreciation Expense = (Cost of Asset – Salvage Value) / number of year
          Depreciation Expense = (100.00 – 5.00) / 20 =
          4.75 dollars for every 100 dollars of airline equipment

  b. Singapore:
  i. Prior to April1, 1989 – Depreciation was at 10% salvage value for 8 years
          Depreciation Expense = (Cost of Asset – Salvage Value) / number of year
          Depreciation Expense = (100.00 – 10.00) / 8 =
          11.25 dollars for every 100 dollars of airline equipment

  ii. After to April1, 1989 – Depreciation was at 20% residual value for 10 years
          Depreciation Expense = (Cost of Asset – Salvage Value) / number of year
          Depreciation Expense = (100.00 – 20.00) / 10 =
          8 dollars for every 100 dollars of airline equipment
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2. Are the differences in the ways the two airlines account for depreciation expense significant? Why would the companies depreciate... [continues]

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