Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need the following: 1.Journal Entries 2. T-Accounts 3.Balance Sheet and Income Statement _____________________________________________________________________________________ Attached are IFRS financial statements for Manchester United PLC. Assume that, although

Need the following:

1.Journal Entries

2. T-Accounts

3.Balance Sheet and Income Statement

_____________________________________________________________________________________

Attached are IFRS financial statements for Manchester United PLC. Assume that, although the format of their financial statements differs, the basic accounting principles are consistent with those weve discussed in class. All amounts are in thousands of pounds (000) unless noted otherwiseplease round to 000s. Note that Manchester Uniteds fiscal year ends on June 30, so 2013 refers to the fiscal year ending June 30, 2013. Assume that the 2013 soccer season also runs from July 1, 2012 to June 30, 2013. Assume a 25% tax rate throughout.

Part I: Your goal is to forecast an income statement, balance sheet and statement of cash flows for Manchester United (ManU) for 2013. For the purposes of this part, refer only to the attached summary financial statements and the following assumptions.

First please provide journal entries in the space provided below.

ManU has three primary lines of revenue commercial (merchandise sales), broadcasting and matchday revenue (tickets to games). Assume that ManU recognizes revenue from ticket sales and broadcasting rights when the associated matches are played, and recognizes revenues from merchandise sales when the merchandise is sold. When forecasting the balance sheet, assume that other non-current assets, other current liabilities and non-current liabilities will remain unchanged from 2012 to 2013.

1. Matchday Revenue (Ticket Sales): You forecast that ManU will earn 96,321 from tickets to games that are played during the 2013 season. Assume that ManU will sell some of the 2013 seats through game-day sales (30,844) and that the remainder (65,477) will be for season tickets sold in 2012 covering the 2013 season (deferred revenue on the balance sheet). Assume further that ManU will sell (for cash) 48,976 of tickets during 2013 for the 2014 season.

2. Broadcasting Revenue: Assume that contracts for media coverage are signed prior to the start of the season (e.g., contracts covering the 2013 season were signed in 2012), but the cash is received both during and after the end of the season (e.g., cash for the 2013 season media rights is received in 2013 and 2014). You forecast that ManU will earn 100,544 from broadcasting games during the 2013 season, of which 59,863 will be paid in cash during 2013 and 40,681 will remain uncollected (trade receivables in the current assets section on the balance sheet) at year end 2013. In addition, ManU will collect any amounts due it as of the beginning of 2013 during 2013. Finally, during 2013, ManU will sign a contract for 102,332 for rights to the 2014 season, payment to be received in 2014 and 2015.

3. Commercial Revenue (Merchandise): Assume that Manu charges royalties on merchandise sold rather than owning the inventory themselves. Assume that ManU will receive 131,136 in cash during 2013 for merchandise sold in 2013.

4. An unusual aspect of ManUs business is that they buy and sell player registrations (contracts) for cash. Basically, the idea is analogous to property, plant and equipmentwhen they buy a player registration, they depreciate it straight line over its life and record a sale if the players contract is ultimately sold. Assume that in 2013 they buy additional player registrations of 40,150 and record amortization totaling 37,700 on all player registrations. Assume further, that player registrations have a life of 5 years and that during 2013 they sell player registrations with a historical cost of 20,500 which are three years through their life at the time of sale and receive 10,800 of cash on the sale.

5. During 2013, ManU will buy property, plant and equipment (PP&E) for cash of 18,023 and record depreciation of 8,234. No PP&E will be sold during 2013.

6. Employees (including players) will earn 168,442 for services rendered in 2013. The ending balance in the compensation payable account will be 124,207. (You need to infer the amount paid to players to end up a balance of 124,207 in compensation payable.)

7. Other operating expenses for 2013 will be 41,287, all paid in cash during 2013.

8. Interest expense for 2013 will be 41,678, all paid in cash during 2013.

9. Taxes are paid in the first quarter of each year on the previous years profits. New taxes payable are recorded at year-end at 25% of pre-tax income.

10. The ending cash balance will be 114,066. Any excess cash is paid out as a dividend and any shortfall is made up by issuing stock.

==================================================================================

CONSOLIDATED INCOME STATEMENT

2012

2013

Commercial revenue

117,611

Broadcasting revenue

103,991

Matchday revenue

98,718

Total Revenue

320,320

Employee compensation expense

(161,688)

Depreciation expense

(7,478)

Amortisation of players registrations

(38,262)

Other Operating Expenses

(41,963)

Total Operating Expenses

(249,391)

Profit on Disposal of Players

9,691

Operating Profit

80,620

Interest expense

(49,536)

Income before taxes

31,084

Income tax expense

(7,771)

Net Profit

23,313

Dividend Paid

10,098

Retained Profit

13,215

CONSOLIDATED BALANCE SHEET

2012

2013

Assets

Property, plant and equipment

Cost

325,894

Accumulated depreciation

-78,028

Net book value

247,866

Players registrations

Cost

306,817

Accumulated amortisation

-194,418

Net book value

112,399

Other noncurrent assets

465,650

465,650

Non-current assets

825,915

Trade receivables

47,163

Cash

74,070

Current assets

121,233

Total assets

947,148

Liabilities and equity

Current income tax liability

7,771

Compensation payable

83,664

Deferred revenue

128,535

Other current liabilities

9,413

9,413

Total current liabilities

229,383

Non-current liabilities

482,668

Equity

Share capital

247,768

Retained earnings (deficit)

-12,671

Total equity

235,097

Total liabilities and equity

947,148

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information System Audit How To Control The Digital Disruption

Authors: Philippe Peret

1st Edition

1032136162, 978-1032136165

More Books

Students also viewed these Accounting questions