Zoe Incorporated has a large piece of machinery where management has assessed and determined there is potential

Question:

Zoe Incorporated has a large piece of machinery where management has assessed and determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine:
• Carrying amount $ 4 million.
• He machine could be sold for $ 3 million less a 10% commission.
• IF the company was forced to sell immediately, the proceeds would likely be $ 2.5 million.
• If the machine continues to be used in production, it is anticipated to generate $ 1.5 mil-lion of cash lows for the next five years. It would require annual maintenance costs of $ 100,000 a year. The equipment could be sold for $ 50,000 at the end of the five years.
• Assume Zoe has a of 6%.

Required:
Is the machine impaired? If so, what is the amount of the impairment loss?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...