Reference no: EM133060560

Question - On January 1, Bob's Truck Company purchases equipment for $225,000. The equipment has an estimated useful life of 10 years and expected salvage value of $25,000. The company uses straight-line depreciation. Four years later, economic factors cause the fair value of the equipment to decline to $90,000. On this date, Bob examines the equipment for impairment and estimates undiscounted expected cash inflows from this equipment of $125,000.

Required 1) Compute the annual depreciation expense relating to Bob's equipment.

Required 2) Compute the equipment's net book value at the end of the fourth year.

Required 3) Is the asset impaired? If so, why is it impaired? Show your calculations.

Required 4) If the asset is impaired, how would this affect the company's balance sheet and income statement the current year, and how would it affect the financials in future periods?