At the beginning of the year, Logan Services purchased a used airplane for $65,000,000. Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1.3 million miles the first year.

1. Compute Logan Services' first year depreciation on the plane using the following methods:
a) Straight-Line
b) Units-of-production

2. Show the airplane's book value at the end of the first year under the straight-line method.

To calculate straight line depreciation you take the cost of the plane minus the salvage value to get the depreciable base. Next take the depreicable base and divide it by the number of years useful life to get your depreciation per year.

For Units of Production depreciation you take the cost of the plane minus the salvage value to get your depreciable base. Next you take the Depreciable base and divide it by by the total number of miles useful life to get your depreciation per mile. Now you take this number times the number of miles of use during the year to get your depreciation.