With all due respect to Michael Jordan and the Chicago Bulls, the Boston Celtics are the most

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With all due respect to Michael Jordan and the Chicago Bulls, the Boston Celtics are the most successful team in professional basketball history. Teams led by Bill Russell, Dave Cowens, John Havlicek, and Larry Bird have won a total of 17 NBA championships. The Celtics are also an unusual professional sports team because ownership shares in the Celtics were at one time publicly traded (on the New York Stock Exchange as €œBoston Celtics Limited Partnership€). As such, the Celtics were required to file financial statements with the SEC each quarter. The June 30, 2001, balance sheet of €œCeltics Basketball Holdings€ follows.

With all due respect to Michael Jordan and the Chicago

1. From June 2000 to June 2001, the Celtics€™ total assets decreased by approximately $5 million. What assets accounted for most of the decrease? Of course, total liabilities and equity also decreased by $5 million; what liability or equity items accounted for most of the decrease?
2. As of June 30, 2001, the Celtics have their NBA franchise recorded, net of amortization, at approximately $3.393 million. What original value was recorded for the NBA franchise? Over how many years is the NBA franchise being amortized? In what year was the NBA franchise originally recorded?
3. Partners€™ capital as of June 30, 2001, is about negative $60.3 million. How can partners€™ capital become negative?
4. The Celtics reported a liability for deferred compensation totaling $6,409,137 ($1,226,316 + $5,182,821). However, the notes to the financial statements revealed the following: €œCeltics Basketball has employment agreements with officers, coaches, and players of the Boston Celtics basketball team. Certain of the contracts provide for guaranteed payments which must be paid even if the employee is injured or terminated.€ The Celtics then disclose that the total amount of these guaranteed payments is $254.585 million. Explain the vast difference between the $6.4 million deferred compensation liability reported in the balance sheet and the $254.585 million compensation obligation disclosed in thenotes.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Intermediate Accounting

ISBN: 978-0324592375

17th Edition

Authors: James D. Stice, Earl K. Stice, Fred Skousen

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