Leasehold Improvements

American movieplex, a large movie theater chain, this is 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 breakfast on Wednesday morning was the length of the depreciation. For these leasehold improvements. The company controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant._x000D_
Keene: Why 25 years? We’ve never depreciated leasehold improvements for such a long._x000D_
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._x000D_
Keene: But isn’t that a pretty rosy estimate of these assets’ actual life? Trade publications show an average depreciation period of 12 years._x000D_
1. How would increasing the depreciation period affect American Movieplex’s is earnings?_x000D_
2. Does revising the estimate pose an ethical dilemma?_x000D_
3. Who would be affected if Person’s suggestion is followed?_x000D_

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