Adam's Bikes Produces Specialized Bicycle Frames

Essay

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.