Impairment Loss
On July 1, 2018, Karen Company purchased equipment for $325,000; the estimated useful life was 10 years and the expected salvage value was $40,000. Straight-line depreciation is used. On July 1, 2022, economic factors cause the market value of the equipment to decrease to $90,000. On this date, Karen evaluates if the equipment is impaired and estimates future cash flows relating to the use and disposal of the equipment to be $195,000.
a. Is the equipment impaired at July 1, 2022?