CASE 4-5 CELTICS Boston Celtics Limited Partnership II and Subsidiaries presente

Question

CASE 4-5 CELTICS Boston Celtics Limited Partnership II and Subsidiaries presented the following consolidated statements of income for 1998, 1997, and 1996 BOSTON CELTICS LIMITED PARTNERSHIP II AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Year Ended June 30, 1998 une 30 1997 June 30 1996 Revenues: $39,107,960 $31,813,019 $35,249,625 28,002,469 23,269,159 22,071,992 7,915,626 62,997,804 Basketball regular season Ticket sales Television and radio broadcast rights fees ther, principally promotional advertising 8,569,485 75,679,914 7,458,651 64,780,268 Costs and expenses Basketball regular season 40,401,643 40,941,156 27,891,264 2,386,042 13,464,566 13,913,893 15,053,333 4,680,168 Team 2,820,107 2,606,218 Game General and administrative Selling and promotional Depreciation Amortization of NBA franchise and other 4,819,478 208,162 2,973,488 140,894 189,324 165,035 61,878,991 13,800,923 164,703 62,275,285 48,829,900 15,950,368 intangible assets 164,702 Interest expense Interest income Net realized gains (losses) on disposition of 722,519 (6,017,737) (5,872,805) (6,387,598) 6,609,541 6,402,366 8,175,184 marketable securities and other short-term investments (18,235) 361,051 (101,138) Income from continuing operations before Provision for income taxes Income from continuing operations 167,317 1,820,306 17,636,816 1,400,000 14, income taxes 1,900,000 12,267,317 1,850,000 420,306 15,786,816 (continued)

Explanation / Answer

a. Other intangible assets are amortized equally over the useful of the asset, so that means generally if there is no acquisition or disposal of intangible asset, the amortization expenses will be same year on year.

We can see that Amortization of NBA franchise was same in 1996 and 1997 but there is a small increase in amortization in 1998 which symbolise that there is an acquisition of "other intangible assets" in the current year, which led to higher amortization expense.

b. Discontinue operations are those operations which had been discontinued by firm and it wont impact our future revenues and profits and hence it should not form part of future projections.

c. The major expense for a basketball association is the salaries it pays to its player, which is classified as team costs and expenses in this financials. So, the major reason why there is an increase in Team costs and expenses is probably because of increase in total number of players as compared to 1996 and the existing Players are more experienced now and demand higher salaries as compared what they have been paid a couple of years back.

d. We can see that expenses are almost same between 1997 and 1998, so the major reason for increase in income from continuing operation is increase in ticket sales by almost 8mn and increase in viewership ship which the association charge for broadcasting on television and radio by 5mn.

e. The reason why the income was substantially higher in 1996 was due to income from discontinued operations, which is just a one time gain and if the company distributes a significant higher profit in 1 particular year which they know they wont be able to sustain going forward, it creates a negative image in the minds of shareholder when the distributions will be lower, so what a company do is, instead of distributing those gains all in one go, they distribute it over a period of time. That is the reason even though there was a very small income in 1997 still the company was having sufficient cash for distribution to its shareholders and in 1998 the company distributed both higher income as well as undistributed income of 1996 which had resulted in higher distribution on 1998 and this the distribution pattern which the company can also sustain going forward.

Please let me know if you face any further queries :-)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.