On January 1, 20Y1, Martin Manufacturing paid cash for a new piece of manufacturing equipment. The machine cost $40,000 and had an estimated useful life of 5 years with a $5,000 salvage value. Martin uses the double-declining balance method of depreciation and the direct method of presenting operating cash flows.

During 20Y2, brand new technology was developed in Martins industry. If Martin does not adjust, it will lose sales, as the new technology enables its competitors to produce a higher quality product using less time and materials. This development triggered an impairment analysis of Martins existing machinery at the end of the year. 20Y2 depreciation had already been recorded by the time of the analysis. The manufacturing equipment purchased in 20Y1 now has an expected future cash flow of $12,000 and a fair market value of $2,000.

Using the following template, please show how the above transactions impacted Martins Statement of Cash Flows, Income Statement, and Balance Sheet for 20Y1 and 20Y2. For the Balance Sheet, indicate cumulative changes to the Balance Sheet as a result of this transaction. These amounts will not necessarily equal the ending balances in the Balance Sheet accounts. Some lines might not have answers. List account names or transaction descriptions in the first column and amounts in the second and third columns.