Business Law

Topics: Contract, Generally Accepted Accounting Principles, Income statement Pages: 2 (349 words) Published: April 26, 2013
Remember that these questions were designed to help guide the analysis you might do to develop appropriate recommendations. You need to focus on identifying and solving the major problem(s) in the case. Make sure you understand WHY you're doing each analysis and how you will use it to guide your recommendations. GOLIATH PRODUCTIONS – QUESTIONS

The CEO of Goliath Productions has hired your consulting firm to produce a report on this possible breach of contract case, including recommendations. Use the report writing guide from the course website. In your analysis of this case include answers to the following questions:

Q. 1. Did Goliath breach the contract? Specifically discuss whether the showing by a competitor movie chain in Toronto constituted a violation of the Goliath/Giant agreement.

Q.2. Assuming the contract is valid, prepare the following financial analyses:

a. Prepare a budget of expected minimum revenues under the contract. Show the sources of revenues from the set of five films and the fee.

b. What are the general revenue recognition criteria established under Generally Accepted Accounting Principles (GAAP)?

c. How would you apply the GAAP criteria for revenue recognition to account for the revenues under this contract? Explain your logic for both realizable and earned.

d. Using the logic you developed in part c, calculate the revenue that Goliath Productions should report for the set of five films for the year ended 12/31/2006.

e. For the year ended 12/31/2006, prepare a schedule that shows the cash flows received from Giant from the contract.

f. Why do cash flows and revenues recognized differ, if they differ under your calculations?

Note: To the extent that you may recognize any antitrust issues (which we would not expect) please ignore them forpurposes of this analysis.

In preparing your report remember to review LDC financial accounting concept 5 (cash flow vs. GAAP income), financial accounting concept...
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