I am not sure how you are supposed to do journal entries with the information gi

Question

I am not sure how you are supposed to do journal entries with the information given and was hoping someone could assist me with this problem.

Your goal is to forecast an income statement, balance sheet and statement of cash flows for Manchester United (ManU) for 2013. 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.

An unusual aspect of ManU’s business is that they buy and sell player registrations (contracts) for cash. Basically, the idea is analogous to property, plant and equipment—when they buy a player registration, they depreciate it straight line over its life and record a sale if the player’s 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.

Explanation / Answer

Journal Entries Account Title Dr $ Cr $ Player Registration                  40,150 Cash                40,150 (purchase of palyer registration in 2013) Player Registration              37,700 Amortization Expense-Player Registration                  37,700 ( Amortization expense for Player Registration 2013) Sale of Player Registration Historical Value of Player Registration                  20,500 Age of registration   3 years Total Life of registartion   5 years Amortization done   60% Book Value= 20500*0.40=                    8,200 Sale Value                    10,800 Gain on Sale                    2,600 Journal Entries Account Title Dr $ Cr $ Player Registration                 8,200 Cash                    10,800 Gain on Sale of Player Registration                 2,600

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