At the beggining of the year, an freight airline purchased a a used airplane for $43,000,000. The freight airline expects the plane to remain useful for 5 years (4,000,000 miles)and to have residual value of $7,000,000. The company expects the plane to be flown 1,400,000 miles the 1st year. Using this data , decide which depreciation method to use for income tax purchases.
Questions:
1. Which depreciation method offers the tax advantage for the first year? Decribe the nature of the of the tax advantage.
2. How much extra depreciation will the freight airline get to deduct for the 1st year as compared with the straight-line method?