Question $6$

ERA corp. bought a machine for $$600,000$ at the beginning of $2018.$ In $2020,$ the accountants of ERA estimate that the net book value of the machine is $$216,000,$ and the fair value is $$180,000.$ The machine will generate $$200,000$ in future cash inflows. Is this machine impaired in $2020?$

The machine is impaired in $2020$ as its net book value exceeds the expected future cash inflows.

The machine is not impaired in $2020$ as its fair value is lower than the expected future cash inflows.

The machine is impaired in $2020$ as its original cost in $2018$ exceeds the net book value in $2020$