Lesson Plan 7.5 – Plant Assets and Depreciation
Course Title – Accounting I
Session Title – Plant Assets and Depreciation
Lesson Purpose – Demonstrate skill in calculating depreciation on plant
assets and analyzing and journalizing transactions related to plant assets.
Behavioral Objectives






Define terms related to plant assets and depreciation.
Calculate depreciation expense using straight-line method.
Calculate depreciation expense using the declining-balance method.
Calculate the book value of a plant asset.
Record plant asset information in a plant asset record.
Analyze and journalize transactions related to plant assets and
depreciation.
Preparation
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
120.42.C
4.a. calculate and record depreciation
of plant assets;
7.a. follow oral and written
instructions;
7.b. develop time management skills
by setting priorities for completing
work as scheduled.
7.c. make decisions using
appropriate accounting concepts;
7.e. perform accounting procedures
using manual and automated
methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
130.166.C
10.c. – prepare depreciation
schedules
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the
mathematical processes and tools used in problem solving.
Lesson 7.5 – Plant Assets and Depreciation
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Materials, Equipment and Resources:





Textbook
Accounting Software
Journal Input Forms
Spreadsheet Software
Internet
Teaching Strategies:



Observation
Verbal Drills
Demonstration
Lesson Content:
Students are instructed on and practice calculating depreciation using the
straight-line method and calculating the depreciation expense for partial years.
They record depreciation information on plant asset records and analyze and
journalize transactions like buying a plant asset, depreciating a plant asset and
disposing of a plant asset.
Assessment:


Observation
Graded Assignments
Lesson 7.5 – Plant Assets and Depreciation
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Additional Resources:
Textbooks:
Guerrieri, Donald J., Haber, Hoyt, Turner. Glencoe Accounting RealWorld Applications and Connections. Glencoe McGraw-Hill, 2000.
ISBN/ISSN 0-02-815004-X.
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 Accounting
Multicolumn Journal Anniversary Edition, 1st Year Course. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43524-0
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 General
Journal Accounting Anniversary Edition, 7th Edition. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43529-1.
Websites:
Depreciation and Amortization on the Income Statement. About, Inc.
2009. http://beginnersinvest.about.com/library/lessons/bldepreciationexpense.htm.
CCH Business Owner’s Toolkit. CCH Incorporated, 2003.
http://www.toolkit.cch.com/text/P06_1548.asp.
Dictionary of Small Business—Depreciation Expense. Carl O. Trautmann,
1994-2009. http://www.small-businessdictionary.org/default.asp?term=DEPRECIATION+EXPENSE.
Business Partners:


Loan officers from a bank
Collection Agency officer
Lesson 7.5 – Plant Assets and Depreciation
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.1 – Identifying Terms
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose – Identify terms related to plant assets and depreciation expense.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
7.g. – process uncollectible accounts
TAKS Correlation:
WRITING
Objective 5: The student will produce a piece of writing that demonstrates a
command of the conventions of spelling, capitalization, punctuation, grammar, usage,
and sentence structure.
Objective 6: The student will demonstrate the ability to revise and proofread to
improve the clarity and effectiveness of a piece of writing.
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Internet
Teaching Strategies:


Observation
Graded Assignment
Activity 7.5.1 – Identifying Terms
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Have students define these terms:
current assets
estimated salvage value
accumulated depreciation
loss on plant assets
personal property
disposal value
plant assets
straight-line method
book value of a plant asset
declining-balance method
assessed value
depreciation expense
plant asset record
gain on plant assets
real property
depreciation
2. Ask your students to create a crossword puzzle using at least ten of the terms
above. They can use these sites to create crossword puzzles:
http://puzzlemaker.school.discovery.com/
http://www.searchamateur.com/corkboard/Crossword-puzzle.html
http://www.puzzlemesilly.com/
Ask students to trade puzzles to work and turn in.
3. Have your students answer these questions to check for their understanding
of the terms.
 Explain the difference between a current asset and a plant asset.
 When should you record depreciation expense in a journal?
 How is estimated salvage value determined?
 What does straight-line depreciation method mean?
 Why is it important to keep a plant asset record up to date or to keep it at
all?
 What is the formula to calculate book value of a plant asset?
 How do you calculate accumulated depreciation?
 How do you know when you have a gain on a plant asset?
 How do you know when you have a loss on a plant asset?
 What is the difference between real and personal property?
Assessment:



Observation
Verbal Drill
Assignment
Quality Feature
Crossword puzzle prepared accurately with at least ten terms
Correct answers in worked crossword puzzle
Answers to verbal questions correct
Completes in a timely manner
Activity 7.5.1 – Identifying Terms
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.2 – Calculating Depreciation Expense
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose - Demonstrate skill in calculating depreciation expense for a plant
asset using the straight-line method of depreciation.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.a. calculate and record depreciation of
plant assets;
4.b. prepare depreciation schedules;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
7.g. – process uncollectible accounts
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Spreadsheet software
Teaching Strategies:


Observation
Demonstration
Activity 7.5.2 – Calculating Depreciation Expense
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Discuss depreciation and its affect on plant assets. Review definitions of plant
assets and explain straight-line method.
2. Discuss useful life and salvage value of a plant asset. Write the formula for
calculating depreciation expense on the board.
Original Cost – Estimated Salvage Value = Estimated Total Depreciation
Expense
3. Have your students calculate the estimated total depreciation expense for the
following plant assets. Demonstrate a couple for them, and then check their
answers.
Date
Purchased
Item
1. Computer
2. Laptop
3. Copier
4. Digital Camera
5. Color Laser Printer
Jan. 1, 2001
July 1, 2001
Oct. 1, 2002
April 1, 2003
Feb. 1, 2001
Original
Cost
Estimated
Salvage
Value
$2,300
$3,100
$10,500
$700
$2,200
$500
$500
$1,200
$50
$600
Estimated
Total
Depreciation
Expense
4. Have your students calculate the annual depreciation for each plant asset.
Demonstrate the formula for calculating annual depreciation.
Estimated Total Depreciation Expense / Useful Life = Annual Depreciation
Item
Estimated Total
Depreciation
Expense
1. Computer
2. Laptop
3. Copier
4. Digital Camera
5. Color Laser
Printer
Annual
Depreciation
Useful Life
4 years
3 years
8 years
3 years
6 years
5. Have your students calculate Accumulated Depreciation as of December 31, 2004
and the annual depreciation for 2004. You might want to create calendars to give
students to use during this exercise. The calendar needs to show all 4 years:
2001-2004.
Formula for Accumulated Depreciation = Annual Depreciation X Number of Years
Owned
Item
1.
2.
3.
4.
5.
Annual
Deprecia
tion
Computer
Laptop
Copier
Digital Camera
Color Laser Printer
Activity 7.5.2 – Calculating Depreciation Expense
Date
Purchased
No. of Years
Owned as of
December 31,
2009 (include
fractions)
Accumulat
ed
Depreciati
on
Depreciation
for 2004
Jan. 1, 2001
July 1, 2001
Oct. 1, 2002
Apr. 1, 2003
Feb. 1, 2001
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
6. Have your students divide into teams of 3 or 4. Each team draws for a type of
business. (Farm or Ranch, Swimming Pool Maintenance Business, Charter Bus
Business, Limousine Business, Construction Business, or School) You can use
other businesses from your area. Have each team decide on 5 plant assets to
purchase for their particular business. Using the Internet or local businesses, locate
cost, approximate salvage value and estimated useful life. Create a table
calculating the total depreciation, annual depreciation, accumulated depreciation
and depreciation for the current year.
Assessment:


Observation
Graded Assignment
Quality Feature
Student participates in verbal drill and accurately calculates
the depreciation for each question.
Student participates as a part of the team effort.
Depreciation calculated accurately for all five items.
Team makes every effort to use logical plant assets for their
particular business as well as providing sources from which
they determined the cost of the plant asset, salvage value and
useful life.
Completes in a timely manner.
Activity 7.5.2 – Calculating Depreciation Expense
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.3 – Preparing Plant Asset Records
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose - Demonstrate skill in preparing plant asset records.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.b. prepare depreciation schedules;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Spreadsheet Software
Teaching Strategies:

Observation
Activity Outline:
Have your students create and use a Plant Asset Record spreadsheet to record the
five plant assets from their previous team assignment.
Activity 7.5.3 – Preparing Plant Asset Records
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Assessment:


Observation
Graded Assignment
Quality Feature
No details omitted.
Amounts accurate.
Completes in a timely manner.
Activity 7.5.3 – Preparing Plant Asset Records
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.4 – Analyzing and Journalizing Depreciation
Expense
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose - Demonstrate skill in analyzing and journalizing depreciation
expense for adjusting entries.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.a. calculate and record depreciation of
plant assets;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
3.e. – use T accounts;
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:



Textbook
Accounting Software
Input Forms
Teaching Strategies:

Observation
Activity Outline:
1. Using “T” accounts, review the transaction for purchasing plant assets. Use
as an example:
Purchased a fishing boat for a new business in offering guided fishing tours. The boat
Activity 7.5.4 – Analyzing and Journalizing
Depreciation Expenses
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
cost $22,250.00 and has an estimated salvage value of $3,250.00 and an estimated life
of 15 years.
2. Using “T” accounts, demonstrate Depreciation Expense and Accumulated
Depreciation. Discuss their balance side, increase and decrease side and
why Accumulated Depreciation is a contra account to the plant asset.
3. Calculate the annual depreciation for the boat. As a review, demonstrate the
formula on the board. Assume the boat was purchased at the beginning of
the current year and the journal entry is for the end of the fiscal year.
Therefore, the annual depreciation is the depreciation expense for the fiscal
year. Discuss when the annual depreciation is not the depreciation expense
for the fiscal year.
4. Have your students use an input form to journalize the depreciation expense
for the boat for the current year.
Assessment:


Observation
Graded Assignment
Quality Feature
Score
Participates in class discussion
Journal entry for depreciation expense accurate
Completes in a timely manner
Activity 7.5.4 – Analyzing and Journalizing
Depreciation Expenses
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.5 – Disposing of a Plant Asset
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose - Demonstrate skill in analyzing and journalizing a transaction
relating to disposing of a plant asset.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
5.a. compare the various forms of
business organizations;
5.b. list advantages and disadvantages
of each form of business organization;
5.c. identify the various accounting
functions involved with each form of
business organization;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Input Forms
Teaching Strategies:


Observation
Demonstration
Activity 7.5.5 – Disposing of a Plant Asset
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Discuss the need to journalize the disposal of a plant asset.



Removes the plant asset cost from the assets since it is no longer
owned. Also removes the contra account accumulated depreciation.
Cash received is recorded.
Records any loss or gain on the plant asset.
2. Discuss the effects on assets if a business does not record any entries when
disposing of a plant asset.
3. Discuss reasons why a business might dispose of a plant asset rather than
continue using the plant asset. Why might a business dispose of a plant
asset before its useful life was over?
4. Demonstrate a transaction in which the sale of the plant asset was for book
value. Have your students put the transaction in an input form.
Received cash from the sale of a fax machine for $50.00, original cost
$695.00, accumulated depreciation $645.00. Receipt No. 111.
5. The fax machine was purchased on January 1, 2000 and disposed of on
December 31, 2009. Ask your students to create a Plant Asset Record
spreadsheet for the fax machine, including the disposal information.
6. Demonstrate a transaction in which a gain was made on the sale of the plant
asset. Explain the new account Gain on Sale and why it has a normal credit
balance.
A lawn care business purchased a lawn mower on January 1, 2001 for
$1,900.00. They estimate its useful life at 5 years with a salvage value of
$300.00. On July 1, 2004, the owner decides to sell it for $600.00.
Answer these questions:





What is the annual depreciation on this plant asset?
How long did the business own the plant asset?
How much is the accumulated depreciation for this plant asset?
What is the book value of the plant asset?
What was the gain on the sale of this plant asset?
7. Have your students journalize the transaction to record the part-of-a-year
depreciation and the sale of the plant asset.
8. Demonstrate the sale of a plant asset for less than book value. Explain the
new account Loss on Plant Asset and why it has a normal debit balance.
Sold a computer that was purchased on July 1, 2001 for $2,500.00. Date
of sale was July 1, 2004. Its estimated useful life is 4 years with a
salvage value of $300.00. The computer was sold for $100.00. Answer
these questions:


What is the annual depreciation on this plant asset?
How long did the business own the plant asset?
Activity 7.5.5 – Disposing of a Plant Asset
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1



How much is the accumulated depreciation for this plant asset?
What is the book value of the plant asset?
What was the loss on the sale of this plant asset?
9. Have your students journalize the transaction to record the part-of-a-year
depreciation and the sale of the plant asset.
Assessment:


Observation
Graded Assignment
Quality Feature
Amounts accurate in all three transactions with questions’
answers accurate
Input forms accurate with debit and credit entries analyzed
accurately
Completes in a timely manner
Activity 7.5.5 – Disposing of a Plant Asset
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.5.6 – Calculating Depreciation Using DecliningBalance Method
Course Title – Accounting I
Session Title –Plant Assets and Depreciation
Activity Purpose - Demonstrate skill in using declining-balance method of
calculating depreciation.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.a. calculate and record depreciation of
plant assets;
4.b. prepare depreciation schedules;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.c. make decisions using appropriate
accounting concepts;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:


Textbook
Spreadsheet Software
Teaching Strategies:


Observation
Verbal Drill
Activity 7.5.6 – Calculating Depreciation Using
Declining-Balance Method
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Explain why a business might choose to use the declining-balance method
of calculating depreciation over the straight-line method.
2. Demonstrate how to calculate the percent to use if the business chooses to
use twice the rate of the straight-line method. Give the example of a plant
asset that has a useful life of 10 years. The straight-line percent is 10%;
therefore, the declining-balance method is twice that, 20%.
Estimated Total
Depreciation Expense
100%
divided by
Years of Estimated
Useful Life
10
Straight-Line
Rate
=
10%
3. Fill in the chart for the Declining-Balance Method of calculating depreciation
for a buggy used to give rides in Central Park. The buggy was purchased on
January 1, 2001 for $8,200 and has a useful life of 5 years. What is the
declining-balance percent for calculating depreciation?
Date
Jan. 1, 2001
Jan. 1, 2002
Jan. 1, 2003
Jan. 1, 2004
Beginning
Book
Value
$8,200
Depreciation
Date
Dec. 31, 2001
Dec. 31, 2002
Dec. 31, 2003
Dec. 31, 2004
Annual
Depreciatio
n
$3,280
Ending
Book
Value
$4,920
4. Ask students to create the same chart using a spreadsheet.
Assessment:


Observation
Graded Assignment
Quality Feature
Student participates in discussion
Completes table accurately using the declining-balance method of
depreciation
Spreadsheet designed with correct formulas
All lines on the spreadsheet labeled accurately
Completes in a timely manner
Activity 7.5.6 – Calculating Depreciation Using
Declining-Balance Method
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1