...Case Analysis 10-3 Kansas City Zephyrs Baseball Club, Inc. I.Issues Why does net income not equal cash flows? Why do we need accrual accounting? (Why do not we fire all accountants and just publish summary bank statements) Why do the differences between owners’, players’, GAAP and truth number exist?(Can accounting numbers be neutral representations of what happened? What happens if a retired non-roster player (e.g. Joe Portocararo) returns to the active roster while continuing to earn the same money promised him in his guaranteed contract? Of what importance are the periodic net income numbers if the clubs can always be sold for huge profits? How should Bill Ahern resolve the accounting conflict between the owners and players? How much did the Kansas City Zephyrs Baseball Club earn in 1983 and 1984? Facts This case shows that how different accounting methods can lead a company to different positions. That is what Bill Ahern was selected on April 9 to focus on reviewing the finances of the Kansas City Zephyrs Baseball Club, Inc., which was bought on November 1, 1982 by five shareholders for $24 million, because both the representatives of the owner of the 26 major league baseball teams and the professional players association agreed that Kansas City Zephyrs Baseball Club’s operations were representative, and the baseball club entity was not owned by another corporation, and it did not own the stadium where they play. So Bill Ahern was reviewing their finances on April...
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...KANSAS CITY ZEPHYRS BASEBALL CLUB INC. In this case we have a typical issue related with different accounting approaches analyzing expenses generated and paid in different periods. We have the position of the Owner-Player Committee (OPC) representing the owners who obviously want to present low profitability in their financial statements to get a better treatment for taxes and in the other side we have the position of the Professional Baseball Players Association (PBPA), the organization representing players, who argues that owners are not transparent with their financial statements showing low or in most cases negative profits, then players petition is that owners show real financial statements and that profit will be share with them. To have a balanced judgment we should think about some accounting concepts as the Revenue and Expense Recognition Principle, where companies recognize revenues and expenses in the period of time when these are earned, which are the basis of Accrual Accounting. By the other hand we also have another approach, the Cash-basis Accounting where companies recognize revenue when cash is received and expense when cash is paid which is not generally accepted. Analyzing the two versions of Income Statement we realized that they agree in several points but they differ basically in three aspects: Roster depreciation: As tax rules allow applying a maximum of 50% depreciation, owners proceeded that way (linearly for 6 years) probably with the intention of...
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...Perspective on Financial Accounting Accountancy 401X; Fall 2004 Michael J. Sandretto, 225C David Kinley Hall (217) 244-6410 (office); (217) 352-4832 (home, before 10:30 p.m.) sandrett@uiuc.edu or michaeljsandretto@earthlink.net Texts: Antle, Rick, and Stanley J. Garstak, Financial Accounting, Southwestern (United States), second edition, 2004 (Antle). Palepu, Krishna G., Paul M. Healy, and Victor L. Bernard, Business Analysis and Valuation: Using Financial Statements, Text Only, Southwestern (United States), fourth edition, 2004 (Palepu). Background: Accounting is called the language of business for at least two reasons. First, accounting terms such as sales, revenues, profit, net income, costs, gross margin, expense, and capitalize are widely used in business. Any businessperson is expected to understand those terms. Second, managers rely on accounting to understand an organization’s economic condition at a point in time and its economic performance over a period of time. As a result, they use accounting information to communicate with others. Managerial Perspective on Financial Accounting will help you understand publicly available financial statements for publicly traded companies and financial statements prepared for internal use. It is also an introduction to financial statement analysis and valuation methods. The basic financial accounting methodology, double-entry bookkeeping, was first published in 1494. However, double-entry bookkeeping was first...
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...Instructor’s Manual and Test Bank to accompany A First Look at Communication Theory Sixth Edition Em Griffin Wheaton College prepared by Glen McClish San Diego State University and Emily J. Langan Wheaton College Published by McGrawHill, an imprint of The McGrawHill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright Ó 2006, 2003, 2000, 1997, 1994, 1991 by The McGrawHill Companies, Inc. All rights reserved. The contents, or parts thereof, may be reproduced in print form solely for classroom use with A First Look At Communication Theory provided such reproductions bear copyright notice, but may not be reproduced in any other form or for any other purpose without the prior written consent of The McGrawHill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. PREFACE Rationale We agreed to produce the instructor’s manual for the sixth edition of A First Look at Communication Theory because it’s a first-rate book and because we enjoy talking and writing about pedagogy. Yet when we recall the discussions we’ve had with colleagues about instructor’s manuals over the years, two unnerving comments stick with us: “I don’t find them much help”; and (even worse) “I never look at them.” And, if the truth be told, we were often the people making such points! With these statements in mind, we have done some serious soul-searching about the texts that so many teachers—ourselves...
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