Would the owner of the PNC Arena where the Carolina Hurricanes play hockey be better off financially if the arena were to shut down?

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.)

 

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.

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: