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ACC 306 Week 2 DQ 2 Ethics Case 15-4 Leasehold Improvements
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ACC 306 Week 2 DQ 2 Ethics Case 15-4 Leasehold Improvements

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  • ACC 306 Week 2 DQ 2 Ethics Case 15-4.doc
  • ACC 306 N Week 2 DQ 2 EC 154 Leasehold Improvements.docx

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? 
2. Does revising the estimate pose an ethical dilemma? 
3.   Who would be affected if Person’s suggestion is followed?
 

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