On January 1, 2016 Hill Bowling purchased equipment for $3.5 million. The equipment is being depreciated by the straight-line method over 10 years with no residual value. In 2020, new advanced bowling equipment has come on the market. As a result, Hill believes the bowling equipment currently being used is going to become obsolete quicker than anticipated, so Hill wants to complete an impairment test on that equipment. Hill estimates that the net cash flows from using the current equipment will be $250,000 per year for the next five years. Hill also expects it could sell the current equipment immediately for $25,000. Hill uses a 14% discounted rate to evaluate other projects of this nature.

Required:

Complete the Impairment test for Hill Bowling.

PV of $1.519

PV of an annuity 3.433

FV of $11.925

FV of an annuity 6.610