Question

Straight-Line

cost of equipment: $450,000

Estimated Salvage Value: $30,000

Estimated Life (yrs): 17.50

test after this many years: 4

net future cash flow (@ time of testing): $300,000

fair value (@ time of testing): $275,000

---------------

A.

Depreciable Cost
Annual Depreciation Expense (SL)

B.

At time of testing	SL Method
Accumulated Depreciaton balance
Book Value
IMPAIRED? (Y/N)
Impairment Loss
B/S at 12/31 in year of testing	SL Method
Equipment
Accumulated Depreciation	$$$,$$$,$$$	$$$,$$$,$$$

Answer 1

Straight-Line	Amt in $
cost of equipment: $450,000	4,50,000
Estimated Salvage Value: $30,000	30,000	c
Estimated Life (yrs): 17.50	17.50
Annual Depreciation	(Cost - Estimated Salvage value)/ Estimated life (yrs)
	(450000-30000)/17.50
test after this many years: 4
Asset Acquisition cost - accumluated depreciation	3,54,000	a
net future cash flow (@ time of testing): $300,000	3,00,000	b
fair value (@ time of testing): $275,000	2,75,000
A
Depreciable Cost	(Cost - Estimated Salvage value)
	4,20,000
Annual Depreciation Expense (SL)	24,000
B.
At time of testing	SL Method
Accumulated Depreciation balance : Depreciation *No of years	96,000
Book Value (Cost of Equipment - Accumulated Depreciation-impairment loss)	3,30,000
IMPAIRED? (Y/N)	Y
Impairment Loss (a-b-c)	24,000
B/S at 12/31 in year of testing	SL Method
Equipment	3,30,000
Accumulated Depreciation	96,000