Prepare a memo as the CFO of the company Murphy Patriots Players Association and Maxfield

Prepare a memo as the CFO of the company Murphy Patriots Players Association and Maxfield

Prepare a memo as the CFO of the company Murphy Patriots Players Association and Maxfield, the CEO of Murphy Patriots Baseball Company. The memo should be directed to the CEO and the Players Associations answering the two questions.

Case study details:

ANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARY NEGOTIATIONS

Murphy Patriots Players Association and Maxfield, the CEO of Murphy Patriots Baseball Company, ask your help in resolving a salary dispute. Maxfield presents the following income statement to the player representatives.

Murphy Patriots Baseball Company Income Statement

Tickets revenues                                                                              $2,000,000

Stadium expense                                             $1,400,000

Ticket expense                                                         25,000

Promotion                                                                  35,000

Player salaries                                                         400,000

Staff salaries and miscellaneous                                      200,000              2,060,000         

                                                                                                                   --------------

Net income (loss)                                                                        $   (60,000)

                                                                                                                  ==========  

Mr. Maxfield argues that the Murphy Patriots really lose money and, until things turn around, a salary increase is out of the question.

As a result of your inquiry, you discover that Murphy Patriots Baseball Company owns 91 percent of the voting stock in Patriots stadium, Inc. This venue is specifically designed for baseball and is where the Patriots play their entire home game schedule. However, Maxfield does not wish to consider the profits of Patriots Stadium in the negotiations with the players. He claims that "the stadium is really a separate business entity that was purchased separately from the team" and therefore does not concern players. The patriots Stadium income statement appears as follows:

 

    Patriots Stadium Income Statement

Stadium rent revenue                                   $1,400,000

Concession revenue                                             800,000

Parking revenue                                                     100,000           $2,300,000

                                                                                -----------------   

Cost of goods sold                                              250,000                                                                                                                             

Depreciation                                                          80,000

Staff salaries and miscellaneous                      150,000                 480,000

                                                                                -----------------          ---------------

Net Income (loss)                                                             $1,820,000

                                                                                                                 =========== 

Required:  1) What advice would you provide the negotiating parties regarding the issue of considering the Patriots Stadium income statement in their discussion? What authoritative literature could you cite in supporting your advice?

2) What other pertinent information would you need to provide a specific recommendation regarding players' salaries?

 

 
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