Hamilton Hawks Players' Association and Mr. Sideline, the CEO and majority owner of Hamilton Hawks Soccer, Inc, ask your help in resolving a salary dispute. Mr. Sideline presents the following income 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 a raise is warranted. Mr. Sideline argues that the Hamilton Hawks really lose money and, until ticket revenues increase, a salary hike is out of the question.

As a result of your inquiry, you discover that Hamilton Hawks Soccer Company owns 85 percent of the voting stock in Hawks Stadium, Inc. This venue is specifically designed for soccer and is where the Hawks play their entire home game schedule. However, Mr. Sideline does not wish to consider the profits of Hawks 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 the players. On top of that, we allocate all the ticket revenues to the team's income statement."

The Hawks Stadium income statement appears as follows:

Required
What advice would you provide the negotiating parties regarding the issue of considering the Hawks Stadium income statement in their discussions? What authoritative literature could you cite in supporting your advice?
What other pertinent information would you need to provide a specific recommendation regarding players' salaries?

Transcribed Image Text:

HAWKS STADIUM, INC. Income Statement Stadium rent revenue. Concession revenue Parking revenue Cost of goods sold Depreciation expense Grounds maintenance expense Staff salaries and miscellaneous $2,500,000 875,000 95,000 $3,470,000 270,000 90,000 410,000 200,000 970.000 $2,500,000 Net income (loss)