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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?