Food Incorporated, a public company, has a machine that processes and packages tuna in oil. This machine cannot be used for any other purpose. The machine originally cost $ 100,000 and is being amortized on a straight- line basis over 20 years. The carrying amount of the machine on 31 December 20X2 is $ 20,000. Recent health studies have shown that due to contamination, eating tuna is bad for your health. Undiscounted cash lows for the machine are $ 22,000. Discounted cash lows for the machine are $ 17,000. The machine is unique; therefore, there is no fair value.

1. Is the machine impaired? Provide the journal entry if there is impairment.
2. At the beginning of the following year new evidence comes out rebutting the evidence that tuna is bad for your health. In fact, studies have shown it is very healthy to eat fish. The company has also been able to package the tuna in water instead of oil. Can any previous impairment be reversed? If yes, provide the journal entry.

  • CreatedFebruary 17, 2015
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