1. What is Blockbuster's amortization timetable? Do you think it is appropriate?
Based on Blockbuster Entertainment Corporation and Subsidiaries consolidated financial statements, the amortization period for intangible assets related to acquired businesses is 40 years on a straight-line basis.

There are two areas that are against a 40 years amortization timetable: 1. 25 years term for company franchise agreements, which is less than the amortization period. 2. Typical high-tech industry assets have a short lifecycle and current practice, which is required by the SEC is around five to seven years and it needs to be related to the nature of business acquired; in this case video stores.

2. What would be the impact on Blockbuster's 1988 earnings per share if 5-year amortization were applied to this goodwill?
The application of a 5-year amortization timetable impacts the amounts that would have to be recognized as the goodwill, which would decrease Blockbuster’s net income and hence their 1988 earnings per share.

3. What would have been the effect on earnings per share if Video Superstore purchases were not included in 1988 revenues?
The exclusion of the Video Superstore revenues would have reduced the earnings per share by $0.02 (loss).

Check for calculation details attached spreadsheet below.

4. Over what period does BV depreciate its "base stock” videotapes?
All base stock videotapes are amortized over a 36 months period on a straight-line basis.

5. What was the effect on earnings per share of the change in depreciation method for “hit” tapes (assume that hit tapes made up 25% of new tape purchases, and that the average hit tape was owned for half the year)?
The effect on