On January 1, Fairfield Company purchases equipment for $256…
On January 1, Fairfield Company purchases equipment for $256,000. The equipment has an estimated useful life of 10 years and expected salvage value of $24,000. The company uses straight-line depreciation. Four years later, economic factors cause the fair value of the equipment to decline to $120,000. On this date, Fairfield examines the equipment for impairment and determines that the equipment’s undiscounted expected cash flows amount to $136,000. a. What is the annual depreciation expense related to this equipment? b. What is the equipment’s book value (aka, net book value) at the end of the fourth year? c. Apply the given information. Is the equipment impaired at the end of the fourth year?