Depreciation at Delta & Singapore Airlines

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Depreciation at Delta & Singapore Airlines

By | Jan. 2010
Page 1 of 6
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 [pic]
2. Are the differences in the ways the two airlines account for depreciation expense significant? Why would the companies depreciate aircraft...