Truckee Meadows Warehousing (TMW) owns and operates a national chain of warehouses that are used for the storage on non-perishable consumer items. Several years ago, TMW purchased a 30% interest in AM-CAN Trucking, a trucking company that services the continental United States and Canada. TMW believed that its investment in AM-CAN would help it stay competitive due to better distribution. TMW paid $2,200,000 for its 30% interest in AM-CAN. In conducting its due diligence before making the purchase, TMW determined that all the identifiable assets and liabilities were fairly valued on AM-CANs books. Since TMW paid $400,000 more than the fair value of the net assets, it allocated this amount to goodwill.

TMW has used the equity method to account for its investment in AM-CAN since the acquisition. In its 12/31/2019 balance sheet, the Investment in AM-CAN account had a balance of $2,750,000.

In late 2019, a major international on-line retailer of non-perishable consumer products signed a contract with the U.S. Postal Service to handle all its shipping and canceled its contract with AM-CAN, effective January 1, 2020. As a result of this cancellation, AM-CAN experienced a 35% decrease in revenues for the fiscal year ending December 31, 2020. The market value of TMWs 30% investment in AM-CAN common stock was $2,100,000 on December 31, 2020, a $750,000 decrease from the market value of the investment on December 31, 2019.

AM-CANs management has been working for several months trying to find ways to increase its revenues, but as of December 31, 2020, it has not developed a definitive strategy to address the material decline in its revenues. Meanwhile, the CFO and Controller for TMW are assessing the investment in AM-CAN and trying to answer the following questions.

1. Should TMW recognize the decrease in value in its investment in AM-CAN in its 2020 financial statements?
2. Since it acquired AM-CAN, TMW has not adjusted the $400,000 allocated to goodwill. Given AM-CANs current situation, should TMW test for impairment of goodwill?