A company purchases equipment for $225000 on july 1,2009, with an estimated useful life of 10 years and expected salvage value of $25,000. Straight-line depreciation is used. On july1, 2013, economic factors cause the market value of the equipment to decline to $90,000. On this date, the company examines the equipment for impairment and estimates $125,000 on future cash in flows related to use of this equipment.
a) is the equipment impaired on july1, 2013? Explain.
b) if the equipment in impaired on July1, 2013, compute the impairment loss and prepare a journal entry to record the loss.
c)what amount of depreciation exprense would the company record for the 12 months from July1, 2013 through June 30,2014? Prepare a journal entry to record this depreciation expense.
d)using the financial statement effects template, show how the entries in parts b) and c) affect comapnys balance sheet and income statement.