### Lesson Plan: Disposal of Fixed Assets
#### Grade: Senior Secondary 2
#### Subject: Financial Accounting
#### Duration: 90 minutes
#### Topic: Disposal of Fixed Assets
---
**Objectives:**
1. Understand the concept of fixed assets and their disposal.
2. Learn the steps involved in recording the disposal of a fixed asset.
3. Be able to calculate the profit or loss on the disposal of a fixed asset.
4. Understand the accounting entries related to the disposal of fixed assets.
**Materials:**
- Whiteboard and markers
- Projector and laptop
- Printed handouts
- Sample financial statements
- Calculator
**Lesson Structure:**
### Introduction (10 minutes)
1. **Greeting and Roll Call:** Quick attendance check.
2. **Warm-Up Activity:** Ask students to name some common fixed assets in a business (e.g., machinery, vehicles, buildings).
3. **Learning Objectives:** Briefly discuss the goals of the lesson.
### Lesson Presentation (30 minutes)
1. **Definition and Examples:**
- Define fixed assets.
- Distinguish between current and fixed assets.
- Examples: machinery, equipment, buildings.
2. **Reasons for Disposal:**
- Outdated technology.
- Wear and tear.
- Change in business operations.
- Upgrade to more efficient assets.
3. **Methods of Disposal:**
- Sale.
- Trade-in.
- Scrapping.
- Donation.
### Detailed Explanation (20 minutes)
1. **Journal Entries for Disposal:**
- The importance of recording the disposal transaction.
- Steps to record the disposal:
a. Remove the asset's cost from the fixed asset account.
b. Remove the accumulated depreciation.
c. Record the proceeds from the sale, if any.
d. Calculate and record any profit or loss on disposal.
- **Pro Forma Journal Entries:**
- To remove the asset from the accounts:
```
Dr. Accumulated Depreciation
Dr. Asset Disposal (if applicable, to balance the entry)
Cr. Fixed Asset (original cost of the asset)
```
- To record the proceeds from the sale:
```
Dr. Cash/Bank
Cr. Asset Disposal
```
- To record any gain on the disposal:
```
Dr. Asset Disposal
Cr. Gain on Disposal
```
- To record any loss on the disposal:
```
Dr. Loss on Disposal
Cr. Asset Disposal
```
- Example Problem:
- An asset with a cost of $10,000 and accumulated depreciation of $8,000 is sold for $3,000.
- Journal entries:
```
Dr. Accumulated Depreciation $8,000
Dr. Cash $3,000
Cr. Fixed Asset $10,000
Cr. Gain on Disposal $1,000
```
### Activity (20 minutes)
1. **Class Exercise:**
- Distribute sample financial statements.
- Let students practice journal entries for the disposal of an asset based on given scenarios.
- Example Scenario:
- A machine with an original cost of $15,000 and accumulated depreciation of $12,000 is scrapped with no residual value.
- Record the disposal.
- Solution:
```
Dr. Accumulated Depreciation $12,000
Dr. Loss on Disposal $3,000
Cr. Fixed Asset $15,000
```
### Recap and Q&A (10 minutes)
1. **Summary:**
- Recap the key points covered: fixed assets, reasons for disposal, methods of disposal, and related journal entries.
2. **Student Questions:**
- Open the floor for student questions and provide clarifications.
### Assignment (5 minutes)
1. **Homework:**
- Prepare journal entries for the following scenario: A delivery van cost $20,000, accumulated depreciation $18,000, sold for $4,000.
**Expected Solution:**
```
Dr. Accumulated Depreciation $18,000
Dr. Cash $4,000
Cr. Fixed Asset $20,000
Cr. Gain on Disposal $2,000
```
2. **Submission:**
- Assign the deadline for the submission in the next class.
### Closing (5 minutes)
1. **Feedback:**
- Ask students to provide feedback on the lesson.
2. **Preview of Next Class:**
- Mention the topic for the next class: "Depreciation Methods and Their Impact on Financial Statements."
---
**Additional Notes:**
- Adapt the lesson pace based on student engagement and understanding.
- Provide extra assistance for students who may struggle with the concepts.
- Encourage group discussions and peer learning to enhance understanding.