Yuan Inc. has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine: • Net book value is $18 million. • The machine could be sold for $10 million less a 11% commission. • If the company was forced to sell immediately, the proceeds would likely be $8 million. • If the machine continues to be used in production, it is anticipated to generate $4 million of cash flows for the next five years. It would require annual maintenance costs of $300,000 a year. The equipment could be sold for $100,000 at the end of the five years. • Assume Yuan has a discount rate of 9%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided. Round time value factor to 5 decimal places.) Required: Is the machine impaired? O Yes O O No If so what is the amount of the imnairment loss? (Enter ansvwer in whole dollars not in million

Yuan Inc. has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine: • Net book value is $18 million. • The machine could be sold for $10 million less a 11% commission. • If the company was forced to sell immediately, the proceeds would likely be $8 million. • If the machine continues to be used in production, it is anticipated to generate $4 million of cash flows for the next five years. It would require annual maintenance costs of $300,000 a year. The equipment could be sold for $100,000 at the end of the five years. • Assume Yuan has a discount rate of 9%. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided. Round time value factor to 5 decimal places.) Required: Is the machine impaired? O Yes O O No If so what is the amount of the imnairment loss? (Enter ansvwer in whole dollars not in million

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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