Impairment}

On January 1, 2011, Tofino Company acquired a pie-making machine for \(\$ 75,000\). The machine was estimated to have a useful life of 10 years with no residual value. Tofino uses the straight-line depreciation method. On January 1,2018, due to technological changes in the bakery industry, Tofino believed that the asset might be impaired. Tofino estimates that the machine will generate net cash flows of \(\$ 12,000\) and that it has a current fair value of \(\$ 10,000\).

\section*{Required:}

1. What is the book value of the machine on January 1, 2018?

2. Compute the loss related to the impairment.

3. Prepare the journal entry necessary to record the impairment of the machine.

\section*{Exercise