Impairment practice problem 1

Key Facts:

Asset purchased 1/1/2011

Total original cost = $22,000,000

SL depreciation, 20 years, 5% salvage value

On 1/1/2017 the following estimates made:

a. Remaining useful life = 10 years

b. Cash inflow per year will be $1,500,000

c. Residual (salvage) value will be zero.

d. Fair Market value = $10,000,000 Required:

1. Compute depreciation expense for 2017

2. Repeat assuming cash inflow will be $2,200,000 per year and FMV = $14,000,000.