Question
Third Eye Blind purchases machine for manufacturing clothing for $100,000 with an original estimated useful life of 5 years and residual value of $20,000. 7.
Third Eye Blind purchases machine for manufacturing clothing for $100,000 with an original estimated useful life of 5 years and residual value of $20,000. 7. After 2 years, demand for the clothing produced by the machine has declined and they estimate that the machine will yield net cash flows of 23,000 each of the next three years (assume cash flows occur at the end of the year). Assume a discount rate of 10% and straight-line depreciation. What impairment does Third Eye Blind recognize at this time (rounded to the nearest dollar)? (Hint: Discounted cash flows approximate fair value)
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