5/20/2018 Delta Airlines Questions

1/2

Delta Airlines Questions

1. What are some of the possible reasons why Delta may have extended the lives of flight

equipment and changed residual values four times since 1986?

2. Assume Delta purchased the following six aircraft.

Year Aircraft Price ($ millions) Aircraft number

1985 MD88 $33 D2851

1988 MD88 $39 D2882

1992 B-757-200 $66 D3921

1993 B-757-200 $68 D39322006 B-777-200ER $210 D4061

2007 B-777-200ER $220 D4972

What would have been the assumed residual value of each aircraft and the first-year depreciation for

each aircraft? (Use 25 and 30 years for estimated lives after 1998 and residual values of 5% for 1993

through 2006 and 10% of cost for 2007)

3. Assume each aircraft in question 2 is still in Deltas fleet in 2007. How would you estimate the

net book value of aircraft before application of fresh start accounting in 2007? How would

this compare to the fresh start value that Delta estimated in 2007 as described in the notes

from consolidated financial statements included in the Form 10-K and the case?

4. Should the adopting of fresh start accounting be open to any corporation where management

feels traditional historical cost-based accounting no longer allows them to present a fair picture?

5. Should fresh start accounting be open to any corporation if management feels historical cost no

longer presents a fair picture of financial position?

5/20/2018 Delta Airlines Questions

2/2