ABC Company purchased equipment on January 1, 2017. The equipment costed $95,000, and its useful life is five years, after which it is expected to be sold for $10,000.

Required: 1. How is the equipment reported on ABC Companys balance sheet at the end of the third year (12/31/2019) using the following depreciation methods:

(1) Straight-line

(2) Double-declining-balance (assume ABC Company plans to switch to the straightline method in the fourth year)

2. ABC Company estimates that, at the end of the third year, the equipment will generate $40,000 cash flow over its remaining life and that it has a current fair value of $36,000.

(1) Assumes that ABC Company uses the straight-line method.

A. Is the equipment impaired? If so, make a journal entry to accounting for the impairment loss.

B. Determine the amount of depreciation for the fourth year (2020).

(2) Assumes that ABC Company uses the double-declining-balance method.

A. Is the equipment impaired? If so, make a journal entry to accounting for the impairment loss.

B. Determine the amount of depreciation for the fourth year (2020)