Understanding Asset Management and Depreciation in Airlines |

School: Middle Georgia State University - Course: AMGT 4210 - Subject: Accounting

Assignment 2 AMGT 4210 March 28, 2023 1.) ASSETS:Aircraft, hangars, flight instructors, social media accounts, pilots for hire LIABILITIES:Insurance on rental aircraft, rent due to DeKalb-Peachtree Airport

EQUITY:Equity could be positive, negative, or even zero. Hypothetically speaking, if assets and liabilities were calculated to be equal, then net equity would = zero. 2.) A.)Depreciation is important to airlines because assets lose value over time. Therefore, it's important to consider depreciation (through methods such as straight-line or double decline) in order to schedule depreciation for tax purposes. Just like in the example from this unit, a $50 million B737 with $25 million worth of depreciation is now worth $25 million, not $50 million. Furthermore, depreciation can be used as a tax reduction benefit since depreciation is an allocation of an asset's cost over its lifespan. B.)Managers need to consider factors such as depreciation schedule and the method of calculating depreciation is used since the choice of depreciation method can affect the value of an airline's assets, which can impact financial ratios. Furthermore, different airlines may have different estimates of the useful life of their assets so adjustments must be made when comparing. 3.) Net Income$117,500 Depreciation60,000 Increase in accounts receivable (27,000) Decrease in accrued expenses (5,000)

Increase in inventory(25,000) Decrease in prepaid expenses 10,000 Increase in accounts payable40,000 >170,500 Increase in investments(23,000) Increase in plant and equipment(110,000) >(133,00) Increase in bonds payable45,000 Preferred stock dividends paid (10,500) Common stock dividends paid(50,000) >(15,500) >22,000 4.) A.) Current assets/current ratio 85,000/4.5 = 17,889. B.) Current assets - quick ratio(current liabilities)

85,000 - 3(17,889) = 26,833