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QUESTION
Plastix Inc. bought a molding machine for $555,000 on June 1, 2016.
- Plastix Inc. bought a molding machine for $555,000 on June 1, 2016. The company expected to use this machine to extrude plastic toys for the next eight (8) years, when the machine would be sold for $45,000. On June 1, 2018, their major customer, Wal-Mart, gave notification that they were terminating Plastix Inc. as a supplier. Plastix Inc.'s accountants estimate that the machine will generate $390,000 in future cash inflows from other customers and the fair value of the machine is $345,000. Plastix uses straight-line depreciation.
a. Is this asset impaired on June 1, 2018? Show your calculation.
b. If the equipment is impaired, what is the impairment loss on June 1, 2018?
