Computing and Assessing Plant Asset Impairment

Zeibart Company purchases equipment for $235,000 on July 1, 2012, with an estimated useful life of 10 years and expected salvage value of $28,000. Straight-line depreciation is used. On July 1, 2016, economic factors cause the market value of the equipment to decline to $97,500. On this date, Zeibart examines the equipment for impairment and estimates $127,500 in future cash inflows related to use of this equipment. a. Is the equipment impaired at July 1, 2016? AnswerYesNo

b. Compute the impairment loss (if any) as of 7/1/2016 as well as the depreciation expense for the 12 months from July 1, 2016 to July 1, 2017. Round calculations to the nearest dollar. Using the financial statement effects template, show how those two entries affect Zeibart Companys balance sheet and income statement.

Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	-	Contra Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital
b. Impairment charge	$Answer	+	$Answer	-	$Answer	=	$Answer	+	$Answer	+	$Answer
c. Depreciation expense	Answer	+	Answer	-	Answer	=	Answer	+	Answer	+	Answer

Income Statement
	Revenue	-	Expenses	=	Net Income
	$Answer	-	$Answer	=	$Answer
	Answer	-	Answer	=	Answer