Lesson 3: Depreciation Method: Straight-Line
Duration of Days: 2
Lesson Objective
Students will calculate straight-line depreciation and journalize annual depreciation expense while analyzing its impact on financial statements.
What is straight-line depreciation?
Why do businesses spread the cost of an asset over time?
How does depreciation affect net income and the balance sheet?
Does depreciation affect cash?
Straight-Line Depreciation
Cost
Salvage Value
Useful Life
Depreciation Expense
Accumulated Depreciation
Book Value
Contra Asset
B. Accounting Principles: Identify and describe GAAP principles and explain their impact on recording and financial reporting.
C. Accounting Process: Complete steps of the accounting cycle and analyze financial statement impact.
Analyze and describe how business transactions impact the accounting equation.
Students apply algebraic reasoning by using a multi-step formula to solve real-world problems. They interpret word problems, identify relevant numerical data, and analyze financial impact, reinforcing mathematical and analytical reasoning skills aligned with the SAT.
Description: Students are introduced to the straight-line method as a systematic way to allocate the cost of a plant asset over its useful life.
Purpose: The purpose of this lesson is to provide students with a clear understanding of how and why businesses allocate the cost of long-term assets over time using the straight-line method. Students build foundational knowledge necessary for financial reporting and analysis.
DOK Level Questions:
Level 1
Define straight-line depreciation.
Level 2
Calculate annual depreciation for a $24,000 asset with $4,000 salvage value and 5-year useful life.
Level 3
Explain how recording depreciation affects both assets and expenses.
Level 4
Analyze how increasing the useful life of an asset would impact yearly net income.
Students examine companies that rely heavily on equipment such as United Parcel Service and Walmart Inc. and discuss how delivery vehicles, technology systems, and store equipment are depreciated over time.
Students may believe depreciation represents market value decline.
• Visual diagram of merchandising transaction flow
• Small group classification practice
• Excel demonstration calculating gross profit
• Scaffolded notes and guided examples
• Spanish vocabulary support for ELL students
Guided practice problems
Independent depreciation worksheet
Journal entry practice
Exit Ticket explaining why depreciation does not affect cash
Short quiz on calculation and financial statement impact
Guided practice problems
Independent depreciation worksheet
Journal entry practice
Exit Ticket explaining why depreciation does not affect cash
Short quiz on calculation and financial statement impact