ANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARYNEGOTIATIONSHamilton Hawks Players’ Association and Mr. Sideline,...ANALYSIS...

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ANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARYNEGOTIATIONS
Hamilton Hawks Players’ Association and Mr. Sideline, the CEOand majority owner of Hamilton Hawks Soccer, Inc, ask your help inresolving a salary dispute. Mr. Sideline presents the followingincome statement to the players’ representatives.
HAMILTON HAWKS SOCCER, INC.
Income Statement
Ticket revenues
$ 3,500,000
Stadium rent expense
$2,500,000
Ticket expense
30,000
Promotion expense
80,000
Player salaries
700,000
Staff salaries and miscellaneous
?265,000
3,575,000
?Net income (loss)
$ (75,000)
The players contend that their salaries are below market and araise is warranted. Mr. Sideline argues that the Hamilton Hawksreally lose money and, until ticket revenues increase, a salaryhike is out of the question.
As a result of your inquiry, you discover that Hamilton HawksSoccer Company owns 85 percent of the voting stock in HawksStadium, Inc. This venue is specifically designed for soccer and iswhere the Hawks play their entire home game schedule. However, Mr.Sideline does not wish to consider the profits of Hawks Stadium inthe negotiations with the players. He claims that “the stadium isreally a separate business entity that was purchased separatelyfrom the team and therefore does not concern the players. On top ofthat, we allocate all the ticket revenues to the team’s incomestatement."
The Hawks Stadium income statement appears as follows:
HAWKS STADIUM, INC.
Income Statement
Stadium rent revenue
$2,500,000
Concession revenue
875,000
Parking revenue
95,000
$3,470,000
Cost of goods sold
270,000
Depreciation expense
90,000
Grounds maintenance expense
410,000
Staff salaries and miscellaneous
200,000
?
970,000
?Net income (loss)
$2,500,000
Required
What advice would youprovide the negotiating parties regarding the issue of consideringthe Hawks Stadium income statement in their discussions? Whatauthoritative literature could you cite in supporting youradvice?
What other pertinentinformation would you need to provide a specific recommendationregarding players’ salaries?

Answer & Explanation Solved by verified expert

3.7 Ratings (527 Votes)

Requirement aA Common control over related enterprises the consolidated income statement will portrait a better economic realityIt is likely that the stadium concession and parking revenues would have been less if the team does not play over thereAlso the 2500000 stadium rent expense does not represent an arm length transaction given the fact See Answer

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In: AccountingANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARYNEGOTIATIONSHamilton Hawks Players’ Association and Mr. Sideline,...ANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARYNEGOTIATIONSHamilton Hawks Players’ Association and Mr. Sideline, the CEOand majority owner of Hamilton Hawks Soccer, Inc, ask your help inresolving a salary dispute. Mr. Sideline presents the followingincome statement to the players’ representatives.HAMILTON HAWKS SOCCER, INC.Income StatementTicket revenues$ 3,500,000Stadium rent expense$2,500,000Ticket expense30,000Promotion expense80,000Player salaries700,000Staff salaries and miscellaneous?265,0003,575,000?Net income (loss)$ (75,000)The players contend that their salaries are below market and araise is warranted. Mr. Sideline argues that the Hamilton Hawksreally lose money and, until ticket revenues increase, a salaryhike is out of the question.As a result of your inquiry, you discover that Hamilton HawksSoccer Company owns 85 percent of the voting stock in HawksStadium, Inc. This venue is specifically designed for soccer and iswhere the Hawks play their entire home game schedule. However, Mr.Sideline does not wish to consider the profits of Hawks Stadium inthe negotiations with the players. He claims that “the stadium isreally a separate business entity that was purchased separatelyfrom the team and therefore does not concern the players. On top ofthat, we allocate all the ticket revenues to the team’s incomestatement."The Hawks Stadium income statement appears as follows:HAWKS STADIUM, INC.Income StatementStadium rent revenue$2,500,000Concession revenue875,000Parking revenue95,000$3,470,000Cost of goods sold270,000Depreciation expense90,000Grounds maintenance expense410,000Staff salaries and miscellaneous200,000?970,000?Net income (loss)$2,500,000RequiredWhat advice would youprovide the negotiating parties regarding the issue of consideringthe Hawks Stadium income statement in their discussions? Whatauthoritative literature could you cite in supporting youradvice?What other pertinentinformation would you need to provide a specific recommendationregarding players’ salaries?


HAMILTON HAWKS SOCCER, INC. Income Statement
Ticket revenues		$ 3,500,000
Stadium rent expense	$2,500,000
Ticket expense	30,000
Promotion expense	80,000
Player salaries	700,000
Staff salaries and miscellaneous	?265,000	3,575,000
?Net income (loss)		$ (75,000)


HAWKS STADIUM, INC. Income Statement
Stadium rent revenue	$2,500,000
Concession revenue	875,000
Parking revenue	95,000	$3,470,000
Cost of goods sold	270,000
Depreciation expense	90,000
Grounds maintenance expense	410,000
Staff salaries and miscellaneous	200,000	? 970,000
?Net income (loss)		$2,500,000