For several years, a number of Food Lion,Inc., grocery stores were unprofitable. The companyclosed, and continues to close, some of these locations. It isapparent that the company will not be able to recover the cost ofthe assets associated with the closed stores. Thus, the currentvalue 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 ofimpaired assets.
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 writedown these impaired assets is considered a noncash expense