An airplane costing $5 million is expected to be flown 800,000 miles over its lifetime of 8 years,at which time it can be sold for $400,000.After 6 years,the total depreciation using the physical service method is $3.8 million.How many miles is the airplane flown in total over its last 2 years (years 7 and 8)? (Answer to the nearest mile)

Question

Quizplus · Accepted Answer

To use the physical service method, we need to divide the cost of the aircraft ($5 million) by its expected lifetime mileage (800,000 miles) to get the cost per mile of $6.25. Then, we can calculate the depreciation for the first 6 years:

Depreciation = mileage flown in 6 years * cost per mile 
Depreciation = $3.8 million 
$3.8 million = mileage flown in 6 years * $6.25 
Mileage flown in 6 years = 608,000 miles

Since the aircraft has a total lifetime mileage of 800,000 miles, that means for the last 2 years it will fly:

Mileage flown in last 2 years = Total lifetime mileage - Mileage flown in 6 years 
Mileage flown in last 2 years = 800,000 miles - 608,000 miles 
Mileage flown in last 2 years = 192,000 miles

Therefore, the answer is (B) 139,130 to the nearest mile.

An Airplane Costing $5 Million Is Expected to Be Flown