### Lesson Plan: Financial Accounting - Depreciation Account III
#### Objective:
Students will understand and be able to record depreciation using different methods and appreciate its impact on financial statements.
#### Duration:
60 minutes
#### Materials Needed:
- Whiteboard and markers
- Projector and computer
- Financial accounting textbooks
- Handouts with sample depreciation problems
- Calculator
#### Lesson Breakdown:
**1. Introduction (5 minutes)**
- Brief recap of Depreciation concepts covered in previous lessons.
- Definition of Depreciation
- Importance of Depreciation in Financial Reporting
- Overview of methods of depreciation (Straight-Line, Declining Balance, Sum-of-Years-Digits, Units of Production)
**2. Review of Depreciation Methods (10 minutes)**
- Straight-Line Method: Depreciation is evenly spread across the useful life of the asset.
- Formula: (Cost of Asset - Residual Value) / Useful Life
- Declining Balance Method: Higher depreciation in the earlier years.
- Formula: Book Value at Beginning of Year * Depreciation Rate
- Units of Production Method: Depreciation based on usage or output.
- Formula: (Cost of Asset - Residual Value) / Total Estimated Production * Actual Production
- Sum-of-Years-Digits Method: Different annual depreciation expenses based on the sum of the years.
- Formula: (Remaining Life of Asset / Sum of the Years Digits) * (Cost of Asset - Residual Value)
**3. Practical Application of Depreciation Methods (20 minutes)**
- Work through a Straight-Line Method example, e.g., Depreciating a machine bought for $10,000 with a residual value of $1,000 and a useful life of 10 years.
- Work through a Declining Balance Method example, e.g., Depreciating a vehicle with an initial cost of $15,000 using a 20% declining balance rate.
- Work through a Units of Production Example, e.g., Depreciating factory equipment with an initial cost of $50,000 to be used for 10,000 units of production over its lifetime.
- Work through a Sum-of-Years-Digits Method example, e.g., Depreciating a computer system bought for $6,000 with a useful life of 3 years.
**4. Interactive Class Activity (15 minutes)**
- Divide students into small groups and provide each group with different example problems for each method.
- Have students calculate depreciation for the first year using the method assigned to their group.
- Groups will present their calculations and methods to the class.
**5. Impact of Depreciation on Financial Statements (5 minutes)**
- Explain how depreciation affects the income statement and balance sheet.
- Discuss the importance of accurate depreciation calculation for financial reporting and tax purposes.
**6. Q&A and Recap (5 minutes)**
- Open the floor to any questions the students might have.
- Summarize key points and clarify any misunderstandings.
**7. Homework Assignment (Handout) (5 minutes)**
- Distribute a worksheet with a mix of problems requiring the use of different depreciation methods.
- Provide due date and expectations for the homework.
#### Assessment:
- Group presentations and participation.
- Accuracy of calculations in the class activity.
- Completion and correctness of the homework assignment.
#### Extension Activity:
- Encourage students to research how different companies report depreciation in their financial statements.
- Discuss depreciation policies of different industries in a future lesson.
This lesson plan provides an extensive overview of depreciation, its methods, and its impact on financial statements, combining theoretical understanding with practical applications.