For several years, a number of Food Lion, Inc., grocery stores were
unprofitable. The company closed, and continues to close, some of these
locations. It is apparent that the company will not be able to recover
the cost of the assets associated with the closed stores. Thus, the
current value of these impaired assets must be written down.
A recent Food Lion income statement reports a $9.5 million charge
against income pertaining to the write-down of impaired assets.
Instructions
a. Explain why Food Lion must write down the current carrying value of its unprofitable stores.
b. Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense.
Click here for the solution: For several years, a number of Food Lion, Inc., grocery stores were unprofitable
