Question
American Movie plex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million
American Movie plex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seat and carpeting. The questions being discussed over breakfast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The company controller, Sarah Keene, was surprisedby the suggestions 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 expansions 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.
Argue in favor of Larry Person's proposal to increase the depreciation period for leasehold improvements.
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