Glencoe Accounting

Unit 2: The Basic Accounting Cycle

WebQuest Internet Project

A Whole New Ball Game Introduction

Soccer is one of the world's most popular sports. However, in the United States, professional soccer has a history of losing money. That situation is changing as the U.S. fan base grows. In this project you will explore the business side of professional sports.

The Task

Operating a successful professional sports business takes more than pitching a fastball or making a three-pointer from outside the key. It means having the best stats on marketing, accounting, management, and merchandising. You are considering purchasing a minor-league professional soccer team. Your task is to investigate and report on the management issues you will face, as well as the kinds of assets, liabilities, revenues, and expenses common to a professional soccer team. Your report should include the following information:

  • An assessment of the trend in soccer popularity in the U.S.
  • Hurdles that must be overcome to create a profitable venture
  • Seasonal cash flow concerns
  • Potential sources of revenue
  • Common expenses for minor-league soccer teams
  • Assets and liabilities common to a sports team
  • Staffing requirements
  • Opportunities for marketing partnerships
The Process

To successfully prepare your report you will need to complete the following items.

  • Use these Web resources to gain an understanding of minor-league soccer.

About.com

United Soccer League

http://experts.about.com/e/u/us/USL_First_Division.htm

Minor-League Team: Rochester Raging Rhinos

www.rhinossoccer.com

Minor-League Team: Minnesota Thunder

www.mnthunder.com

BizJournals.com

Thunder pinches pennies

www.bizjournals.com/twincities/stories/1999/05/31/smallb1.html

CaryNews.com

Cary poised to get new professional men's soccer team

www.carynews.com/front/story/2879138p-9334936c.html

Entrepreneur Magazine

Good Sports

www.entrepreneur.com/article/0,4621,314210-1,00.html

American Soccer History Archives

www.sover.net/~spectrum/

Forbes International Soccer Team Valuations

www.forbes.com/2005/03/30/05soccerland.html

CPA Journal

Keeping the financial scorecard - accounting for a sports franchise

www.nysscpa.org/cpajournal/old/12650259.htm

  • Write a brief synopsis of the trend in soccer popularity in the U.S.
  • Make a list of sources of revenues that a minor-league soccer team might generate and identify the months in which peak revenues will occur
  • Prepare a list of potential expenses that a minor-league soccer team might incur
  • Identify potential investors, partners, or sponsors for minor-league soccer teams
  • Brainstorm with classmates marketing campaign ideas that will bring attention and revenue to a professional soccer team
  • Review the organizational structures for other minor-league soccer teams, to determine what staffing requirements are common
  • Consider retail merchandising plans for team memorabilia
Guidance

To improve your report, consider the following questions and suggestions:

  1. What advantages can you see to purchasing a professional soccer team instead of a baseball or basketball team?
  2. What factors prevent the sport of soccer from being as popular as football or basketball in the U.S.?
  3. What annual revenues are enjoyed by European soccer clubs like Manchester United or Chelsea?
  4. What conditions caused previous U.S. minor-league soccer teams to fold?
Conclusion

Here are some suggestions for finishing your report.

  • Talk with a soccer coach at your school or in your community about your project for additional ideas.
  • Conduct an oral or written survey of family and friends to inquire about their interest in professional soccer.
  • Interview the business manager of a local minor-league baseball team regarding common expenses and revenue sources. Some of these items may be transferable to the sport of soccer.
  • Present your report to the class and ask for feedback on ideas that you may have overlooked.
Questions
  • Describe how revenues from ticket sales for a professional soccer team affect the accounting equation.
  • What journal entry is required when a team purchases billboard advertising space on credit?
  • When considering the purchase of a professional soccer team, explain why the review of the team's recent income statement would be helpful.
  • What three general closing entries are required for a sports team owned by an individual?
  • What cash control procedure might help a sports team accountant discover that a team player had not cashed his paycheck?
Chapter Activities Chapter 3

Some professional sports teams own substantial assets, such as the stadiums in which they play, luxury suites for players, training equipment, and private buses. As assets are purchased or sold, the elements of the accounting equation are changed, yet the overall equation must remain in balance.

Question:

  • If a professional soccer team issues a check for an amount owed to a creditor for the purchase of training equipment, what accounts are increased or decreased?
Chapter 6

Whether a sports team is purchasing a computer system for its accounting office or depositing a check that was contributed by a sponsor, each transaction can be recorded using the general journal. Documents such as invoices, receipts, and check stubs provide evidence of business transactions.

Question:

  • If the owner of the Minnesota Thunder invests $5,000 in the team, what journal entry should be made?
Chapter 9

The financial statements for any company help owners and managers understand how the business is performing and changing. As a sports team changes or grows, its financial statements will be impacted.

Question:

  • In 2005, the Liverpool soccer club earned revenues of $170 million and reported net income of $57 million. What is the club's return on sales?
 Chapter 10

Closing entries are a part of the accounting cycle in every industry. Just as the scoreboard is reset after every game, closing entries zero out the temporary accounts so that a new period's performance can be measured.

Question:

  • Imagine that total revenues for the Minnesota Thunder were $1,240,000 and total expenses were $1,114,000. What balance remains in the Income Summary account after closing entries for these two amounts are made?
Chapter 11

Cash control is an important managerial tool used in businesses of every size. While your local sporting goods store may reconcile one bank account with only a few outstanding checks, the accountant for a sports franchise like the Boston Red Sox may be required to reconcile several bank accounts with hundreds of outstanding checks.

Question:

  • The accountant for the Atlanta Silverbacks must reconcile the team's bank account. There are two deposits ($450 and $1,120) that are recorded in the checkbook, but do not appear on the bank statement. Three checks ($1,000, $30, and $115) are outstanding.

1. What total amount should be added to the bank statement balance on the reconcilation?

2. What total amount should be subtracted from the bank statement balance on the reconciliation?

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