Chapter 11, Problem 7CPA

To determine

Impairment loss of assets:

Impairment loss of assets arises when the carrying value of the assets recorded on the balance sheet of the company exceeds its fair market value.

Depreciation:

Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation.

Straight-line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

$\text{Depreciation expense=}\frac{\left(\text{Cost of the asset}-\text{Salvage value}\right)}{\text{Estimated useful life of the asset}}$

To identify: Whether the stamping machine is impaired or not.