Copyright © 2016 by Dr. Wendy Tietz, http://accountingintheheadlines.com/

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

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.