Week 11 — One Van, Five Years: Cost, Depreciation, and a Sale

Assignment 10 of the term — measure the bicycle shop's delivery van, depreciate it by three methods, record its sale, and set a founder straight about what depreciation does and does not measure.

This adaptive assignment uses a coaching dialogue to help you turn a first attempt into a clear, evidence-based report. You remain the author. The coach asks questions, checks the reasoning you show, and waits for you to revise before it produces the required report. This week's lecture tutorial, quiz, discussion, and Accounting Workshop practise the same ideas from other angles; this assignment is where you put them together. It builds on Week 4, where you recorded the shop's first depreciation as an adjusting entry that touches one income statement account and one balance sheet account and never Cash.

The task

This week's material is pinned. The cost of a long-lived asset is everything needed to acquire it and get it ready for use, such as the price, freight, and setup. Depreciation is the allocation of a long-lived asset's cost to the periods that use it; it is not a measure of market value and is not a cash payment. The straight-line method records (cost − residual value) ÷ useful life each year. The units-of-production method records (cost − residual value) ÷ total expected units × units used. The double-declining-balance method multiplies book value at the start of each year by twice the straight-line rate and stops when book value reaches residual value. The gain or loss on disposal is the cash received minus the asset's book value on the date of sale. GAAP allows each method, and this course compares them by their effects, never as better or worse.

The running case is an illustrative, unnamed bicycle repair and sales shop, organized as a corporation by two founders; it describes no real business. The shop buys a delivery van to bring repaired bicycles back to customers, expects to use it for 5 years or 90,000 miles, and later sells it.

One of the founders (an illustrative person) sends you this message: "That $1,500 delivery fee is a cost of doing business, so let's put it in this month's expenses. Depreciation is how much the van loses in value, and straight-line is the best method anyway. And when we sell the van for $12,500, that's a $12,500 gain." Your job is to answer the way this course would, starting from four small calculations on the shop's books.

Work these four problems, showing your arithmetic:

1. The bicycle shop buys a delivery van for a price of $28,000, pays $1,500 of freight to have it delivered, and pays $500 to set it up to carry bicycles. It expects a $3,000 residual value and a 5-year useful life. How many dollars of straight-line depreciation does it record each year?
2. The bicycle shop's delivery van cost $30,000, has a $3,000 residual value, and is expected to be driven 90,000 miles. In its first year it is driven 20,000 miles. How many dollars of units-of-production depreciation does the shop record for that year?
3. The bicycle shop's delivery van cost $30,000 and has a 5-year useful life, so its double-declining-balance rate is twice the straight-line rate. How many dollars of double-declining-balance depreciation does the shop record in Year 2?
4. The bicycle shop's delivery van cost $30,000 and is depreciated by straight-line at $5,400 a year. At the end of Year 3 the shop sells it for $12,500 in cash. How many dollars of gain or loss does the shop record on the sale, and which is it?

Beside each answer, add one brief interpretation:

• Problem 1: state the van's cost and explain why the freight and setup belong in it; write the year-end depreciation entry as a journal entry, debit first and credit second; and say why the entry does not touch Cash.
• Problem 2: give the per-mile rate and the van's book value at the end of Year 1 under this method; and explain what makes one year's depreciation larger or smaller than another's.
• Problem 3: give the rate, Year 1's depreciation, and the book value at the end of Year 2; explain why the last year's depreciation is only $888; and compare Year 1 with straight-line's $5,400 by its effect on net income, not as better or worse.
• Problem 4: give the book value at the sale; write the sale entry as a journal entry, all debits first and the credit second; and explain why the $12,500 is not a gain.

Explain it to a non-expert

The founder means well and has four things wrong. Write a 3–5 sentence message that explains why the $1,500 freight is part of the van's cost, why depreciation is not the van's loss in market value, why the course compares the methods by their effects instead of naming a best one, and why the sale is a $1,300 loss rather than a $12,500 gain. Name one limit, such as that the residual value and useful life are the shop's own estimates, or that tax depreciation is outside this course. Explain any technical term in everyday words. More than one good answer is possible.

For a different, ungraded example, imagine a friend who buys a used camera for side work and says, "My camera is worth less every month, so that drop is my depreciation." Model answer: "Depreciation is not what your camera would sell for today; it spreads what you paid for it across the years you plan to use it. If you paid for it once and plan to use it for several years, each year carries a fair share of that price. A fair caveat: the number of years is your own estimate, so revisit it if the camera wears out sooner."

Use that pattern for the founder, with your own wording and evidence.

Part 1 — Student instructions

1. Draft all four answers, the four brief interpretations, and your message to the founder before opening a chatbot.
2. Open any course-approved chatbot. Copy the entire Coach Prompt box, including its first and last marker lines, and paste it as one message. The coach will ask for your draft and then work one question at a time.
3. Reply in your own words. Show calculations when asked. Use the coach's feedback to revise at least one calculation or explanation, even if your first attempt was correct.
4. Continue until the prompt's exit condition is met.
5. Save the chat's share link and copy the final report exactly as the coach gives it.

The chatbot is a coach, not a ghostwriter. It must draw out your reasoning rather than write the work for you. Add up the debits and credits of every entry it mentions yourself, check that no schedule it suggests takes book value below the residual value, and check every claim it makes about a rule against Chapter 11 before you use it.

Coach Prompt

COPY EVERYTHING BELOW THIS LINE
ROLE: You are a careful learning coach for an introductory financial accounting course. Draw out and challenge MY thinking about the cost of a long-lived asset, depreciation, and the sale of an asset. Do not write my assignment for me, do not invent work I did not show, and never invent a standard, a rule, a rate, a statistic, or a quotation. Every journal entry I write must list the debits first and the credits second, and its debits must equal its credits. Describe the depreciation methods by their effects, never as better or worse. Give no tax or investment advice.

ASSIGNMENT: Work through these four problems in order, one at a time. Do not invent, replace, or reorder a problem. The pinned facts: the cost of a long-lived asset is everything needed to acquire it and get it ready for use, such as the price, freight, and setup. Depreciation is the allocation of a long-lived asset's cost to the periods that use it; it is not a measure of market value and is not a cash payment. Straight-line = (cost - residual value) / useful life. Units-of-production = (cost - residual value) / total expected units x units used. Double-declining-balance multiplies book value at the start of each year by twice the straight-line rate and stops when book value reaches residual value. The gain or loss on disposal is cash received minus book value on the date of sale. The bicycle shop is illustrative.
PROBLEM P1: The bicycle shop buys a delivery van for a price of $28,000, pays $1,500 of freight to have it delivered, and pays $500 to set it up to carry bicycles. It expects a $3,000 residual value and a 5-year useful life. How many dollars of straight-line depreciation does it record each year?
PROBLEM P2: The bicycle shop's delivery van cost $30,000, has a $3,000 residual value, and is expected to be driven 90,000 miles. In its first year it is driven 20,000 miles. How many dollars of units-of-production depreciation does the shop record for that year?
PROBLEM P3: The bicycle shop's delivery van cost $30,000 and has a 5-year useful life, so its double-declining-balance rate is twice the straight-line rate. How many dollars of double-declining-balance depreciation does the shop record in Year 2?
PROBLEM P4: The bicycle shop's delivery van cost $30,000 and is depreciated by straight-line at $5,400 a year. At the end of Year 3 the shop sells it for $12,500 in cash. How many dollars of gain or loss does the shop record on the sale, and which is it?
After the four results, I must briefly interpret each one: for P1, the van's cost and why the freight and setup belong in it, the year-end depreciation entry, and why it does not touch Cash; for P2, the per-mile rate, the book value at the end of Year 1, and what makes one year's depreciation larger or smaller; for P3, the rate, Year 1's depreciation, the book value at the end of Year 2, why the last year is only $888, and a comparison of Year 1 with straight-line's $5,400 by its effect; for P4, the book value at the sale, the sale entry, and why the $12,500 is not a gain. I must then write a 3-5 sentence message to a founder who wants to expense the freight, thinks depreciation is the van's loss in value, calls straight-line the best method, and calls the $12,500 a gain, with one limit. I must explain technical terms in everyday words.

SCORING CRITERIA: Score only evidence I supply: computing the depreciation figures (40 points), recording and classifying the entries (32 points), clarity for a non-expert reader (16 points), and showing work so it can be checked (12 points). For each of P1-P4, give 2, 1, or 0 evidence units per criterion; one unit is worth 5 computing points, 4 recording points, 2 clarity points, or 1.5 showing-work points. Sum all four problems within each criterion. Count my message to the founder only with P4, not again with P1-P3.
COMPUTING UNITS: A correct dollar amount = 2; the right figures and operation with only an arithmetic slip = 1; a missing value or the wrong figures or operation = 0. Do not penalize an alternative valid method or equivalent correct notation.
RECORDING UNITS: For P1-P3 separately, an interpretation that meets every part named for that problem = 2; some but not all parts = 1; none = 0. For P4, BOTH the book value at the sale and the balanced sale entry with the reason the $12,500 is not a gain, AND a message to the founder that covers the freight, depreciation and market value, comparing methods by their effects, and the loss on the sale, with a named limit = 2. If full P4 evidence is absent but at least one accurate substantive part appears, give 1. No accurate reading = 0; naming a term alone does not earn a unit, and a depreciation entry that credits Cash, freight recorded as an expense, a double-declining-balance rate applied after subtracting the residual value, book value taken below the residual value, a method called better, an entry that does not balance, or the sale price called a gain is not accurate. An arithmetic slip alone is not a recording error.
CLARITY UNITS: For each problem, labeled evidence understandable to someone new to accounting, with technical terms explained = 2; intelligible evidence that needs rereading because of ambiguity or jargon = 1; absent or unintelligible evidence = 0. Include the message to the founder with P4 if submitted. Missing reasoning alone does not lower clarity for otherwise clear submitted work.
SHOWING-WORK UNITS: For each problem, checkable figures and steps = 2; a relevant but incomplete figure or step = 1; a result alone or no method = 0. A visible method stays checkable despite an arithmetic slip.

Do NOT invent grading rules.

DIALOGUE RULES: Ask exactly one question per message and wait for my reply. Start by asking for my complete first attempt. Build each next question from my exact words. Probe an unsupported claim and ask me to examine its evidence. Keep the conversation focused on questions rather than completed work.

ENGAGEMENT GUARDS: A greeting, copied prompt, yes/no reply, or one-word reply is not a substantive exchange. Do not flatter or accept agreement as evidence. Praise only a concrete move I made. If evidence is missing, say what is missing and ask for it. Require a real revision plus a short reflection on why the revision is better. Do not issue the report early.

EXIT CONDITION: Continue until at least five substantive exchanges have occurred AND I have supplied all four results and their brief interpretations AND written my message to the founder AND revised at least one calculation or explanation AND reflected on the revision. Stop only after whichever requirement happens last.

REPORT: After the exit condition is satisfied, output exactly these labelled lines in this order. Replace X with the exact earned score; it may end in .5 and must not be rounded to a whole number. Base every line only on evidence in this chat; write "Not supplied" for missing evidence and never raise the score for polished chatbot prose.
STUDENT'S SCORE: X/100
EVIDENCE FOR THE SCORE: [specific evidence from my calculations and reasoning]
REVISION MADE: [what I changed and why]
STRENGTH: [one earned strength]
NEXT STEP: [one concrete improvement]
Then tell me to submit this report, my revised work, and the share link.
COPY EVERYTHING ABOVE THIS LINE

Deliverables

Submit these three items in the assignment entry:

• your revised work with all four results, their brief interpretations, the purchase, depreciation, and sale entries, and your message to the founder — written, or recorded as audio or video with a transcript, or as a labelled spreadsheet of the depreciation schedules and the entries with a short explanation; every form is graded by the same scoring criteria;
• the coach's five-line report; and
• the conversation share link.

Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

Equivalent route (no AI required)

This route assesses the same Week 11 skills — measuring a long-lived asset's cost, computing straight-line, units-of-production, and double-declining-balance depreciation as cost allocation, stopping double-declining-balance at the residual value, recording the depreciation and the sale as balanced journal entries, finding the gain or loss on disposal from book value, and comparing the methods by their effects — for comparable time and effort, about 60 to 90 minutes, the same as the coached route. Complete the same four problems, the four brief interpretations, the entries, and the message to the founder. Then audit your own first draft against the attached scoring criteria, criterion by criterion, and write a second draft. Add a 150–200 word revision memo that names one calculation or explanation you changed, the evidence that prompted the change, and one question you still have about this week's material. Submit the revised work, your completed criteria checklist, and the revision memo in the assignment entry; together they replace the share link and the coach's report. This route uses the same scoring criteria and the same points, with no penalty for choosing it.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

The calculations, entries, reasoning, revision, and final report must be your own. Do not ask the chatbot to create the assignment or add evidence you did not produce, and do not let it subtract the residual value before applying the double-declining-balance rate, take book value below the $3,000 residual value, or call the $12,500 sale price a gain. Submit an honest share link from your own dialogue. The equivalent route keeps the same workload and evidence and requires no AI account.

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