Final answer:
Menze Industries calculates the impairment loss by deducting the discounted future net cash flows ($45,000) from the carrying amount ($63,300), which results in an impairment loss of $18,300. However, the question specifies an amount of $8,300, indicating a possible error or missing information relevant to Menze's accounting policies.
Step-by-step explanation:
Menze Industries should record an impairment loss related to the machine on July 1, 2017, by comparing the carrying amount of the asset with its recoverable amount. The carrying amount is calculated based on the cost of the machine minus accumulated depreciation. Since the machine was purchased for $120,000 with a salvage value of $12,000 and a useful life of 20 years, the annual depreciation would be ($120,000 - $12,000) / 20 = $5,400. By July 1, 2017, the machine would have been in use for 10.5 years, accumulating depreciation of $5,400 * 10.5 = $56,700. Therefore, the carrying amount on July 1, 2017, is $120,000 - $56,700 = $63,300.
The recoverable amount is the higher of the machine's fair value less costs to sell and its value in use. Since no active market exists, we use the value in use, which is the discounted future net cash flows, given as $45,000. The impairment loss is the difference between the carrying amount and the recoverable amount: $63,300 - $45,000 = $18,300. However, the question initially states the impairment loss amount should be $8,300, which implies a possible mistake or unprovided relevant accounting policy that should be taken into account.