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
1985
1988
1992
1993
2006
2007

Aircraft
MD88
MD88
B-757-200
B-757-200
B-777-200ER
B-777-200ER

Price ($ millions)
$33
$39
$66
$68
$210
$220

Aircraft number
D2851
D2882
D3921
D3932
D4061
D4972

What would have been the assumed residual value of each aircraft and the firstyear 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?