Healthy Inc. bought a private jet for the use of its top ranking officials. The cost of the private jet is $15 million and can be depreciated either using a composite useful life or useful lives of its major components. It is expected to be used over a period of 7 years. The engine of the jet has a useful life of 5 years. The private jet’s tires are replaced every 2 years. The private jet will be depreciated using the straight line method over
(a) 7 years composite useful life.
(b) 5 years useful life of the engine, 2 years useful life of the tires, and 7 years useful life applied to the balance cost of the jet.
(c) 2 years useful life based on conservatism (the lowest useful life of all the parts of the jet).
(d) 5 years useful life based on a simple average of the useful lives of all major components of the jet.