In a celebrated lawsuit, a major entertainment company stated that it could not afford to pay any amounts sought by the plaintiff. In this case, the plaintiff sought compensation for what it considered to be its fair share of the revenues generated from a movie that was written by the plaintiff. It cited negative earnings, as disclosed in its income statement, as the primary defense. The presiding judge sided with the defending company and denied the plaintiffs request for compensation. The topical coverage in Week One focuses on the preparation and purpose (use) of financial statements. 1. How would you advise the plaintiff to use other financial statement(s) to counter the primary defense?

2. Should the differences between accrual and cash basis be considered? Explain.