“I think it’s a great idea,” said Natalie Duke, the director of sales and marketing at the Rosewood Plaza Hotel. Natalie was telling Renée Watson, the hotel’s general manager, about her request to install an electronic programmable sign that would be installed directly under the hotel’s current 30‐foot high sign that displayed the hotel’s name.

“We could use it to welcome groups to our property, advertise special rooms promotions we are running, or even advertise restaurant specials. It gives us great flexibility and it would be easy to program,” said Natalie.

“And what would it cost us to get the sign and have it installed?”

“Well,” replied Natalie, “the sign company will sell us the sign outright for $40,000. Installation of the sign, the required software package, and the laptop we need to do the programming would run us another $5000. If we want to, however,” continued Natalie, “we could lease the sign on a five‐year contract. If we do that, the sales rep told me that the monthly payments would only be $750 per month, and at the end of the lease we would own the sign!”

1. What would be the impact on the hotel’s monthly income statement if the sign were purchased? What would be the impact on the income statement if the sign were leased under an operating lease?

2. What would be the impact on the hotel’s balance sheet if the sign were purchased? What would be the impact on the balance sheet if it were leased under an operating lease?

3. Assume both Renée and Natalie are given their monthly bonuses based on the hotel’s “Income Before Income Taxes” results as listed using the USALI income statement format. Do you think that this would impact how Renée makes her decision?

4. Do you think Renée’s decision regarding the sign is primarily a property operations related decision, an accounting‐related decision, or both? Explain your answer.