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3. If the Carolina Hurricanes Owner were to suddenly shut down the PNC Arena, would he be better or worse off financially? Explain. Assume that there is no alternate use for the PNC Arena.

3. If the Carolina Hurricanes Owner were to suddenly shut down the PNC Arena, would he be better or worse off financially? Explain. Assume that there is no alternate use for the PNC Arena.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Gale Force Holdings Limited Partnership owns both the Carolina Hurricanes (a professional hockey team) and the PNC Arena where the Hurricanes play. A recent news article stated that the Carolina Hurricanes owner lost $1.3 million in operating the PNC Arena for the fiscal year ending June 2015 (Forbes, Mike Ozanian, "Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena," November 6, 2015.) Gale Force Holdings LP leases the PNC Arena from the Centennial Authority (a public/private partnership that developed and owns the arena). In 2008, the lease for PNC Arena was extended to 2024. See the following income statement excerpt from the Gale Force Holdings LP Consolidated Statement of Operations for the year ended June 30, 2015. (See complete statement at http://www.scribd.com/doc/288745589/Gale-Force-Holdings (Links to an external site.).) Revenues 23,055,725 Operating expenses 22,748,229 Operating income (loss) 307,496 Depreciation & Amortization (1,707,607) Other Income/Non-Arena Related 105,864 NET INCOME (LOSS) (1,294,247) Questions 1. Does "Depreciation & Amortization" affect cash (ignore income taxes)? 2. The title of the Forbes news article stated "Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena." Did the owner actually incur out-of-pocket expenses causing the loss? 3. If the Carolina Hurricanes Owner were to suddenly shut down the PNC Arena, would he be better or worse off financially? Explain. Assume that there is no alternate use for the PNC Arena.
Transcribed Image Text:The Gale Force Holdings Limited Partnership owns both the Carolina Hurricanes (a professional hockey team) and the PNC Arena where the Hurricanes play. A recent news article stated that the Carolina Hurricanes owner lost $1.3 million in operating the PNC Arena for the fiscal year ending June 2015 (Forbes, Mike Ozanian, "Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena," November 6, 2015.) Gale Force Holdings LP leases the PNC Arena from the Centennial Authority (a public/private partnership that developed and owns the arena). In 2008, the lease for PNC Arena was extended to 2024. See the following income statement excerpt from the Gale Force Holdings LP Consolidated Statement of Operations for the year ended June 30, 2015. (See complete statement at http://www.scribd.com/doc/288745589/Gale-Force-Holdings (Links to an external site.).) Revenues 23,055,725 Operating expenses 22,748,229 Operating income (loss) 307,496 Depreciation & Amortization (1,707,607) Other Income/Non-Arena Related 105,864 NET INCOME (LOSS) (1,294,247) Questions 1. Does "Depreciation & Amortization" affect cash (ignore income taxes)? 2. The title of the Forbes news article stated "Carolina Hurricanes Owner Lost $1.3 Million Operating PNC Arena." Did the owner actually incur out-of-pocket expenses causing the loss? 3. If the Carolina Hurricanes Owner were to suddenly shut down the PNC Arena, would he be better or worse off financially? Explain. Assume that there is no alternate use for the PNC Arena.
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