Reference no: EM132562903

Question - A few years ago, JJI invested in an initiative called Juice Jets. JJI purchased 10 used vans and outfitted them for juice making, so that mobile juice bars could attend community events, concerts, and parks during the warm weather months. As at December, 31, 2019, the vans have a total net book value of $400,000 and a remaining useful life of five years. JJI had expected the Juice Jets, which were piloted in Charlottetown and St John's, to contribute positively to net income. However, this has not been the case. The 10 Juice Jets together barely sell enough juice to cover operating costs (which include fruit and vegetables, fuel costs and other vehicle expenses, vendor fees to attend events, and employee wages). Tim is disappointed that the Juice Jets are not doing well, especially because capital costs to start up the project were significant. Operating cash flows for each of the next five years are estimated to be $85,000. The appropriate discount rate for determining the value of the vans is 10%. The vans could be sold immediately for $250,000 or at the end of five years for $90,000. What is the accounting issue?