1. On January 2, assume that the company BB, using GAAP, purchases equipment that fabricates a key-product part. That equipment costs $95,000, and its estimated useful life is five years, and after which it is expected to be sold for $10,000. BB uses straight-line depreciation.

At the end of the third year, BB estimates that the equipment will generate $39,500 in undiscounted cash flow over its remaining life and that it has a current fair value of $36,000. Is the equipment impaired? If, so, determine the amount of the gain or loss on the asset impairment. (Clearly indicate gain or loss and the amount.)

2. Delilah Manufacturing Company, a calendar year reporting company, purchased a machine for

$80,000 on January 1, 2013. At the date of purchase, Delilah incurred the following additional costs:

Loss on sale of old machinery $1,500

Freight-in 800

Installation cost 2,300

Sales tax paid on new machine 500

Testing cost prior to regular operation 300

The estimated salvage value of the machine was $5,000, and Delilah estimated the machine would have a useful life of 15 years, with depreciation being computed using the straight-line method. In January 2015, accessories costing $5,200 were added to the machine in order to reduce operating costs and improve the machine's output. These accessories neither prolonged the machine's life nor provided any additional salvage value. What should Delilah record as depreciation expense for 2015?

3. The Key Company sold a machine. The machine had accumulated depreciation of $50,000 and a salvage value of $6,000. If the machine sold for $16,000 and a gain of $4,000 is recognized, what is the original cost of the asset?

4. Nadir Company purchased a milling machine on January 3, Year 1 for $55,000. The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with $5,000 salvage value. At the beginning of Year 9, the company paid $15,000 to overhaul the machine. As a result of this expenditure, the company estimated that the remaining useful life of the machine was now 8 years with no salvage value. What should be the depreciation expense recorded for this machine in Year 9 and what is the asset's December 31, Year 9 net book value?

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