Adam's Bikes produces specialized bicycle frames. The production process uses two machines, which together form a cash generating unit (CGU). The following information is relevant to the evaluation of impairment for these machines.
Required:
a. Assume that the welding machine has a fair value less costs to sell of $420,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.
b. Assume that the welding machine has a fair value less costs to sell of $455,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.

Question

Adam's Bikes produces specialized bicycle frames. The production process uses two machines, which together form a cash generating unit (CGU). The following information is relevant to the evaluation of impairment for these machines.
  Required:
a. Assume that the welding machine has a fair value less costs to sell of $420,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.
b. Assume that the welding machine has a fair value less costs to sell of $455,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.

Quizplus · Accepted Answer

The Answer of Adam's Bikes produces specialized bicycle frames. The production process uses two machines, which together form a cash generating unit (CGU). The following information is relevant to the evaluation of impairment for these machines.
  Required:
a. Assume that the welding machine has a fair value less costs to sell of $420,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.
b. Assume that the welding machine has a fair value less costs to sell of $455,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.

Adam's Bikes Produces Specialized Bicycle Frames