When Does a Cost Become an Asset? — Capitalization, Useful Life, and Salvage Value
Lesson 02 teaches the rules for deciding when a cost becomes a long-term asset (capitalization) versus an immediate expense. Students learn to estimate useful life and salvage value, calculate the depreciable base, and understand how accumulated depreciation builds. This is the foundation for all depreciation methods covered in Lessons 03 and 04.
- ▶Decide whether a purchase should be capitalized as an asset or expensed immediately
- ▶Estimate useful life and salvage value for common business assets
- ▶Calculate the depreciable base (Cost - Salvage Value) for an asset
- ▶Explain how accumulated depreciation builds over time
This lesson follows a structured 6-phase learning model designed for authentic project-based learning.
Hook
Reconnect to Lesson 01's equipment purchase. Sarah needs to classify three new purchases — which are assets and which are expenses?
Introduction
Explicit instruction: capitalization rules, useful life, salvage value, and depreciable base with worked examples.
Guided Practice
Mixed purchase scenarios with reduced scaffolding. Students classify and explain choices, not just compute.
Independent Practice
Algorithmic deliberate practice: classify purchases as capitalize or expense with streak tracking and reteach guidance.
Assessment
Short MCQ exit ticket on capitalization vocabulary, useful life, salvage value, and reasoning.
Closing
Reflect on confidence and understanding. Connect to the business problem. Preview straight-line depreciation.