ACC 306 Week 2 DQ Ethics Case 15 4
in Accounting by purrfect
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ACC 306 Week 2 DQ Ethics Case 15-4
American Movieplex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seats and carpeting. The question being discussed over break- fast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The com- pany controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant.
Keene:Why 25 years? Weve never depreciated leasehold improvements for such a long period.
Person:I noticed that in my review of back records. But during our expansion to the Midwest, we dont need expenses to be any higher than necessary.
Keene:But isnt that a pretty rosy estimate of these assets actual life? Trade publications show an average depreciation period of 12 years.
Required:
1.How would increasing the depreciation period affect American Movieplexs income?
2.Does revising the estimate pose an ethical dilemma?
- Who would be affected if Persons suggestion is followed?
