Prepare an accrual basis income statement for April. (Hint: Translate expenses into a per game basis…

The local minor league baseball team, The Hampton Hounds, began their season in late April, with 5 home dates (and no road games) in April. The team’s owner is seeking a short-term loan from the local bank to help fund some improvements. As a result, a statement of cash receipts and disbursements was prepared for the bank for April. The owner estimates that the average cash receipts from tickets and concessions is $20,000 per home date. The average operating cash disbursements is $4,000 per home date. Players are paid the 15th of every month during the regular season (until Oct. 15th) at an average rate of $18,000 per month per player. All 25 players receive their first paycheck on May 15th. Rent is paid on the stadium on the first of every month during the playing season at a rate of $60,000 per month, with the first payment due on May 1st and the last payment due on September 1st. In addition to individual game sales, the Hounds sold 1,000 season tickets during the month of April at $720 per ticket. There are 160 total games in the season, half of which are home dates.

1. Prepare a statement of cash receipts and disbursements for April.

2. Prepare an accrual basis income statement for April. (Hint: Translate expenses into a per game basis and match against the revenue.)

3. Which statement best represents the results of operations for April?

4. Comment on management’s intention to use the statement of cash receipts and disbursements to support the request for the bank loan rather than using an accrual-based income statement.

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