Presented below is information related to equipment owned by ABC on December 31, 2012.

Cost $300,000

Accumulated depreciation to date 120,000

As of December 31, 2012, ABC estimates that the equipments cash flows will total $160,000 and the present value of the equipments future cash flows are $145,000. As of December 31, 2013, the equipment has a salvage value of $10,000 and is expected to product 200,000 units over its remaining life. ABC uses an activity based depreciation method and produced 25,000 units in 2013. At December 31, 2013, the company estimated $125,000 to be the equipments undiscounted cash flows and a fair value of $120,000 for the equipment.

1. Determine the impairment loss that should be booked in 2012, assuming the asset was used in business.
   1. $20,000
   2. $35,000
   3. $40,000
   4. $155,000