Machine A was purchased on January 1, 2018 for $5 million. Its estimated useful life...
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Machine A was purchased on January 1, 2018 for $5 million. Its estimated useful life at that date was 50 years and the company uses the straight line method of depreciation. During the year 2022, the use of increased technology decrease the value of the machine. At December 31, 2022, the company estimated that it can sell the machine for $3.6 million but it has to incur costs of $430,000. The value in use was assessed to be $3.1 million.
Machine B was purchased on January 1, 2020, for $3 million. Its estimated useful life was 15 years and the company uses the straight line method of depreciation. At December 31, 2022, the company estimated that it can sell the machine for $2.9 M and incur selling cost of $$215,000. The value in use was assessed to be $2M
(a) Determine the impairment, if any, on the machines at December 31, 2022 (11 marks)
(b) Explain how the machines are to be treated in the financial statement after the impairment. (4 marks)
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