Question

In August 2016, Heavy-lift Helicopters Ltd. purchased a new helicopter for its logging and heavy lift operations at a cost of $1.2 million. Based on past experience, management has determined that the helicopter will have a useful life of 14,000 flying hours, at which time it will have an estimated residual value of $150,000. During 2016, the helicopter was used for 1,400 flying hours and in 2017 it was used for 1,650 flying hours. Heavy-lift Helicopters has a December 31 year end and uses the units-of-production method of depreciation for its helicopters.

Required

Determine the depreciation expense on this helicopter for 2017 and its carrying amount at December 31, 2017.

Answer 1

Depreciation calculation per flying

A	Cost	$ 1,200,000.00
B	Residual Value	$      150,000.00
C=A - B	Depreciable base	$ 1,050,000.00
D	Usage	14000
E	Depreciation per Flying Hour	75

Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
2016	$    1,200,000.00	1400	$ 105,000.00	$   1,095,000.00	$   105,000.00
2017	$    1,095,000.00	1650	$ 123,750.00	$       971,250.00	$   228,750.00

Depreciation expenses for December 2017	$      123,750.00
Carrying value of Helicopter on December 2017	$      971,250.00