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Depreciation Methods

Developed by Susan M. Moncada, Ph.D., CPA, Indiana State University
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Summary

This depreciation methods activity worksheet models the thought processes students need to emulate in order to determine the straight-line, units of activity, and double declining balance annual depreciation expense for a piece of scientific equipment. Each section of the worksheet begins with a number of questions and is followed by a depreciation schedule to be completed. The final five questions require students to compare and contrast the results of the three methods in terms of impact on the balance sheet and income statement.

Learning Goals

Homogenizer image As a result of completing this worksheet, students should be able to:

Higher Order Thinking Skills: Completion of this activity requires a combination of comprehension, application, and analysis.

Context for Use


This worksheet is designed to be used after the straight-line, units of activity, and double declining balance methods for determining depreciation expense have been covered in a principle of financial accounting course. Its use is intended after students have an understanding of the basic accounting equation, the relationship between the balance sheet and income statement, as well as an understanding of the matching principle. Due to the complexity of the concepts involved, the activity focuses on calculating the annual (12 month) depreciation expense and balance in the accumulated depreciation accounts over the asset's useful life. Similarly, the additional components that comprise the cost of an asset, such has installation and testing costs, have been ignored as well.

Implementation options.
The worksheet can be used in a variety of ways:
  1. As an in-class activity with each major section of the worksheet completed by students after each depreciation method has been covered.
  2. As a culminating in-class activity after all three methods have been covered in class.
  3. As a homework assignment completed outside of class.
(Note: Given so few real-world businesses apply the Sum-of-the-years digits method, it has not been included on this activity worksheet.)

Description and Teaching Materials

Teaching Notes and Tips


Students enrolled in principles of financial accounting courses need practice applying the concepts covered and this worksheet helps to accomplish this task. For implementation options 1 and 2, the instructor should circulate among the students, acting as a coach, confirming correct responses, and providing hints for incorrect responses.

Students enrolled in principles of accounting courses also need to build self-confidence in their ability to grasp the concepts being learned. Implementation options 1 and 2 help achieve this goal by providing immediate feedback to students.

Assessment


This worksheet provides for formative assessment. In addition, the worksheet could be collected with students earning homework points as determined by the instructor.

References and Resources

Kimmel, P.D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting Tools for Business Decision Making, 3rd ed., John Wiley & Sons, Inc.

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