For several years, a number of Food Lions,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.
- Explain why Food Lion must write down the current carrying value of its unprofitable stores.
- Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense
This solution is comprised of a response which contains the write down of impaired assets, the writing down of carrying value for unprofitable stores, and the treatment of write down of unprofitable stores as a non cash expense. This solution is 253 words in length.