On May 1, 2013, Silky, Inc., purchased machinery for $350,000; the estimated useful life was eight years and the expected salvage value was $15,000. Straight-line depreciation is used. On May 1, 2015, economic factors cause the market value of the machinery to decrease to $190,000. On this date, Silky evaluates whether the machinery is impaired.

a. Assume that on May 1, 2015, Silky estimates future cash flows relating to the use and disposal of the machinery to be $200,000. Is the machinery impaired at May 1, 2015? If it is impaired, what is the amount of the impairment loss? AnswerThe machinery is impairedThe machinery is not impaired Impairment loss = $Answer

b. Assume that on May 1, 2015, Silky estimates future cash flows relating to the use and disposal of the machinery to be $300,000. Is the machinery impaired at May 1, 2015? If it is impaired, what is the amount of the impairment loss? AnswerThe machinery is impairedThe machinery is not impaired Impairment loss = $Answer