ASH ACC 306 Week 3 Assignment E 16-24,
E 16-25, E 17-10, E 17-19, P 16-7, P 17-16
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16-24-e-16-25-e-17-10-e-17-19-p-16-7-p-
17-16
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’s income?