Question Details

ACC 306 WEEK 2 DISCUSSION 2 ETHICS CASE 15-4
Ethics Case 15-4 - American Movieplex - Leasehold improvements ● LO3
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? We’ve 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 don’t need expenses to be any higher than necessary.
 Keene:But isn’t 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 Movieplex- income? 
2. Does revising the estimate pose an ethical dilemma? 
3.   Who would be affected if Person- suggestion is followed?


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