Due to increased competition from low-cost foreign manufacturers, Juliet€™s Toy Company is experiencing significant declines in sales. The company produces its toys from an assembly line. The equipment in this assembly line has not been previously revalued or impaired. For the year ending December 31, 2010, the company controller gathered the following information:

Required:
Determine whether the assembly line is impaired, and if so, the amount of the impairment.

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Original cost Accumulated depreciation Fair value Costs to sell Incremental cash flow 2011 Incremental cash flow 2012 Incremental cash flow 2013 Incremental cash flow 2014 Incremental cash flow 2015 and later Risk-adjusted cost of capital $4,000,000 1,200,000 1,700,000 100,000 500,000 400,000 700,000 800,000 12%