DM equipment is concerned over the performance of its main lifting machine, which is used daily in the operations of the company. The General Manager has therefore hired a mechanical consultant to analyze the machine and give recommendations regarding the performance and industry standards of related machines. The consultant returned with DMs worst fear relating to the machine. The machine was outdated and in need of significant upgrade. The current market value of the existing machine was deemed to be $1.6 Million, which was significantly lower than the Net book value of $2.5 million. The consultant also advised that the machines remaining useful life of 10 years will have to be downgraded to four years.

The general manager conveyed this report to you the accountant who was tasked with analyzing the situation and communicating any financial impact on the accounts of the company as a result of the state of the equipment. Your analysis is expected to include all key terms and concepts related to the situation at hand.