Zeibart Company purchases equipment for $225,000 on July 1, 2012, with an estimated useful life

of 10 years and expected salvage value of $25,000. Straight-line depreciation is used. On July 1,

2016, economic factors cause the fair value of the equipment to decline to $90,000. On this date,

Zeibart examines the equipment for impairment and estimates $125,000 in future cash inows

related to use of this equipment.

a. Is the equipment impaired at July 1, 2016? Explain.

b. If the equipment is impaired on July 1, 2016, compute the impairment loss and prepare a jour-

nal entry to record the loss.

c. What amount of depreciation expense would Zeibart record for the 12 months from July 1,

2016 through June 30, 2017? Prepare a journal entry to record this depreciation expense.

(Hint: Assume no change in salvage value.)