On January 1,2016,BelgianAir purchases an airplane for €14,400,000.The components of the airplane and their useful lives are as follows: BelgianAir uses the straight-line method of depreciation.The asset is assumed to have no salvage value.
Under IFRS,the entry to record depreciation expense on the asset at December 31,2017 will include a credit to accumulated depreciation of:

Question

On January 1,2016,BelgianAir purchases an airplane for €14,400,000.The components of the airplane and their useful lives are as follows:  BelgianAir uses the straight-line method of depreciation.The asset is assumed to have no salvage value.
Under IFRS,the entry to record depreciation expense on the asset at December 31,2017 will include a credit to accumulated depreciation of:

Quizplus · Accepted Answer

The useful life of the airplane is 20 years. Therefore, the annual depreciation expense would be €14,400,000/20 = €720,000. As the airplane has been in use for two years, the accumulated depreciation at the end of 2017 would be 2*€720,000 = €1,440,000.

However, the question asks for the credit to the accumulated depreciation account in the entry to record the depreciation expense for 2017. Since the accumulated depreciation at the end of 2016 would be €720,000, the credit to the accumulated depreciation account for 2017 would be:

Accumulated depreciation at end of 2017 - Accumulated depreciation at end of 2016 
= €2,160,000 - €720,000 
= €1,440,000

Therefore, the correct answer is C) €780,000.

On January 1,2016,BelgianAir Purchases an Airplane for €14,400,000