Depreciation: Airplanes and Garbage Trucks Part I: Airplanes Assume that on January 1‚ 2005‚ each of the three airlines purchases a new Boeing 757 for $75 million. Each airline estimates that the residual value will be 5% of cost. Each airline uses the average depreciation period that is consistent with its policies as stated in the Appendix‚ found on page 3. On January 1‚ 2009‚ each firm sells the plane. First‚ assume that Northwest sells its plane for $55 million‚ Delta sells its plane
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with purchase of new assets comes the frequently heard term i.e. depreciation! All of us must have heard about depreciation and know that it is deducted before arriving at Net Profit. However‚ not many of us are aware of its nitty-gritty’s and the part that it plays in determining the profits of a company. In fact many of us completely ignore analyzing this important parameter. However‚ with considerably flexibility over how depreciation is calculated‚ it is one of the easiest figures to manipulate
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bought? 3. The price of a hamburger increased from $1.10 to $1.59. What percent did the price increase? 4. Morgan company received from Lee Company an invoice date September 27. Terms were 2/10 EOM. List PRice on the invoice was $5‚000 (freight not included). Morgan receives a 9/7 chain discount. Freight charges are Morgan’s responsibility but Lee agreed to repay the $150 freight charge. Morgan pays the invoice November 9. What does Morgan pay Lee? 5.Sullivan’s Handbags marks up their bags at
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The word ’Depreciation ’ has been derived from the Latin word ’Depretium ’ which means ’decline in price ’ or ’value ’. Depreciation relates to fixed assets which loose value on account of usage. Therefore ’Depreciation ’ means decline in value of fixed assets on account of usage. Definitions: Depreciation may be defined as the permanent and continuing diminution in the quality‚ quantity or the value of an asset.William Pickles Depreciation in the shrinkage in the value of an asset at a given
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Sum of the Years’ Digits Method of Depreciation Sum of the years’ digits method of depreciation is one of the accelerated depreciation techniques which are based on the assumption that assets are generally more productive when they are new and their productivity decreases as they become old. The formula to calculate depreciation under SYD method is: SYD Depreciation = Depreciable Base × Remaining Useful Life Sum of the Years’ Digits In the above formula‚ depreciable base is the difference between
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Discussion Q’s Why might the companies be using different depreciation methods? Average age of Delta’s aircraft = 8.8yrs; Average age of Sing Aircraft = 5.1yrs. The useful life of an airplane may be much less for Singapore since one of their competitive advantages is flying a modern fleet. How could you argue for Delta changing its depreciation assumptions? Against? Perhaps Delta changes its assumptions because technologically newer aircraft now tend to last longer than technologically older
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years using the straight-line method. The firm expects the fleet of 25 cars to generate $100‚000 per year in earnings before taxes and depreciation for five years. Hertz is an all-equity firm in the 34-percent tax bracket. The required return on the firm’s unlevered equity is 10 percent‚ and the new fleet will not add to the risk of the firm. a. What is the maximum price that Hertz should be willing to pay for the new fleet of cars if it remains an all-equity firm? b. Suppose Hertz
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DETERMINING A DEPRECIATION POLICY [IFRS for SME’s: Section 17] IFRS for SMEs defines depreciation as the systematic allocation depreciable amount of an asset over its useful life‚ Depreciation is often described as the amount by which the economic value embedded in the asset diminishes through its use‚ namely‚ the estimated cost of using the asset in the process of generating income or carrying out the operating activities of the entity. Many practicing applies the depreciation based on the
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Spanish Armada Invasion‚ she wanted her troops to know that she herself is a worthy sovereign and she did that using acknowledgment‚ loaded words‚ and repetition. First‚ Queen Elizabeth achieves her purpose of persuading them that she is a trustworthy leader is through acknowledgement.The purpose of acknowledgement is to recognize a drawback in her argument but providing a solution. When Queen Elizabeth says “I know I have the body but of a weak and feeble woman; but I have the heart and stomach
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Have you ever wondered what was the purpose of life was? The purpose of life is confusing and there are many questions to answer. Well‚ one person had done an experiment on himself for two years in the woods and his name Henry David Thoreau. Thoreau wanted to know about the purpose of life. So‚ on July 4‚ 1845‚ he went to Concord‚ Massachusetts in to Walden’s woods near a pond. During his two years in the woods‚ he wrote a journal explaining about the purpose of life at the woods. The question to
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