Question
#13) Plastix Inc. bought a molding machine for $555,000 on June 1, 2016. The company expected to use this machine to extrude plastic toys for
#13) Plastix Inc. bought a molding machine for $555,000 on June 1, 2016. The company expected to use this machine to extrude plastic toys for the next eight (8) years, when the machine would be sold for $45,000. On June 1, 2018, their major customer, Wal-Mart, gave notification that they were terminating Plastix as a supplier. Plastixs accountants estimate that the machine will generate $390,000 in future cash inflows from other customers and the fair value of the machine is $345,000. Plastix uses straight-line depreciation.
ANSWER THE FOLLOWING QUESTIONS
a. Is this asset impaired on June 1, 2018? Show your calculation.
b. If the equipment is impaired, what is the impairment loss on June 1, 2018?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started