please tell us about your relationship with media. For example, what forms of media do you use for news, entertainment, research, or other information? Do you use social media? What forms of social media and why? What is your personal view on media, is it a necessary and useful tool for society or a distraction from life via social media and advertising, or a bit of both?

Internet of Things: Think about the term "Internet of Things" in which things (objects, animals, and people) are connected to the Internet and can automatically transfer data over a network. Our society is already filled with many examples of “smart nodes”—such as cars, appliances, and entertainment devices—that are connected to the Internet. What are the advantages and disadvantages of developing a more robust "Internet of Things" and continuing to add more smart nodes?

Once you have successfully negotiated a sponsorship deal, the process transitions to sponsorship activation. In other words, how are you going to activate or operationalize the terms discussed within the deal. Activation is the creative aspect of a sponsorship deal. What is the most creative sponsorship activation idea you have seen implemented within the sports/entertainment/event industry? What made this idea so creative?

1. Discuss how the distribution channels have changed in the hospitality and travel industries based on the following factors.

• Technology
• International travelers

2. Why is franchising such a fast-growing distribution channel in the hospitality and tourism industry?

• Select one field (food, lodging, entertainment)
• You don't need to select a specific company, you can discuss franchising in general based on the field you picked.

Superior Appliances is a retail store that sells household appliances. Merchandise sales are subject to an 8 percent sales tax. The firm’s credit sales for July are listed below, along with the general ledger accounts used to record these sales. The balance shown for Accounts Receivable is for the beginning of the month. DATE TRANSACTIONS July 1 Sold a dishwasher to John Martinez; issued Sales Slip 501 for $925 plus sales tax of $74. 6 Sold a washer to Helen Thai; issued Sales Slip 502 for $1,875 plus sales tax of $150. 11 Sold a high-definition television set to Richard Jones; issued Sales Slip 503 for $1,625 plus sales tax of $130. 17 Sold an electric dryer to Mary Schneider; issued Sales Slip 504 for $1,275 plus sales tax of $102. 23 Sold a trash compactor to Victoria Caramello; issued Sales Slip 505 for $800 plus sales tax of $64. 27 Sold a home entertainment system to Jeff Budd; issued Sales Slip 506 for $1,725 plus sales tax of $138. 29 Sold an electric range to Michelle Ly; issued Sales Slip 507 for $1,450 plus sales tax of $116. 31 Sold a double oven to Peter McVay; issued Sales Slip 508 for $1,350 plus sales tax of $108. GENERAL LEDGER ACCOUNTS 111 Accounts Receivable, $34,500 Dr. 231 Sales Tax Payable 401 Sales Required: Open the general ledger accounts and enter the balance of Accounts Receivable for July 1, 2019. Record the transactions in a sales journal. Total, prove, and rule the sales journal as of July 31. Post the column totals from the sales journal to the proper general ledger accounts. Analyze: What percentage of credit sales were for entertainment items?

Sales Journal

Ledger Accounts

Analyze

Prepare a sales journal to record the above transactions.

Post the opening balances and column totals from the sales journal into the appropriate general ledger accounts for July 2019.

What percentage of credit sales were for entertainment items? (Round your answer to 2 decimal places.)

Citizen Potawatomi Nation offers many services to its citizens and to other Native Americans throughout its tribal jurisdiction, including housing, community, education, health, veterans, elder and career services. Citizen Potawatomi Nation dedicates resources through federal funding, grants and tribal revenue to provide these and other services to the tribal and community citizens who need them most. In 2011, Citizen Potawatomi Nation clinics had more than 62,000 patient visits, filled more than 1530,000 prescriptions, served more than 14,000 meals to the elderly, assisted nearly 3,000 families through Indian Child Welfare and provided 3,100 scholarships to students.

Citizen Potawatomi Nation has several tribal enterprises that provide services to our citizens and create a substantial economic impact in our communities. Our businesses further the success and prosperity of the Nation by providing employment opportunities for tribal citizens and revenue to support tribal operations.

Our enterprises provide the economic foundation to diversify and expand our current business operations and provide for expanded economic growth in our communities.

With more than 2,200 employees, Citizen Potawatomi Nation operates a variety of tribal enterprises including First National Bank, Grand Casino Hotel & Resort Resort, FireLake Discount Foods and the Community Development Corporation.

Citizen Potawatomi Nation owns and operates the largest tribally owned grocery store in the United States. Our enterprises provide services to our citizens and create a substantial economic impact in our communities. Our businesses further the success and prosperity of the Nation by providing employment opportunities for tribal citizens and revenue to support tribal operations.

Citizen Potawatomi Nation operates two casinos, as well as multiple entertainment venues, retail shops, fuel and convenience stores, golf courses, museums and hotels. Visit one of our entertainment destinations for an evening out or a day of family fun.

Opened in 2006 as Grand Casino, Pottawatomie County’s premier gaming destination includes 2,000 of the latest in Vegas-style slots, various table games and Oklahoma’s only Keno lounge on its 125,000 square feet of gaming space.

In 2014, a “Grand” expansion took place with the addition of a 14-story luxury hotel tower, dining selections such as Flame Brazilian Steakhouse and Grand Café, as well as longtime staples The Grand Buffet and The Grand Stand Sports Grille. The added Grand Event Center hosts top-name entertainers, sporting events and conferences for all business and professional sectors, making Grand Casino Hotel and Resort the premier destination for work and play, located just a few minutes’ drive from Oklahoma City.

First National Bank & Trust Co. is the largest tribally owned national bank in the United States. FNB has branches in Shawnee, Holdenville, Granite, Mangum and two in Lawton, Oklahoma.

First National Bank & Trust Co. began when the charter for First Oklahoma Bank, N.A., was approved on June 30, 1983. With a capital structure of $2.5 million, the bank opened its doors on Oct. 29, 1984. The original incorporators were C. L. Craig Jr., Mark Finley, David Ingram, Jerald O'Connor, Frank Sims and Stephen Sims. Citizen Potawatomi Nation purchased the bank in February 1989.

Since its founding in 1983, First National Bank & Trust Co. has grown steadily through sound financial management practices and by investing time, energy and resources in the communities we serve.

The accounting profit before tax of Jameson Ltd for the year ended 30 June 2018 was $320,000. It included the following revenue and expense items:

The draft statement of financial position as at 30 June 2018 included the following assets and liabilities:

Additional information:

a) All plant was purchased on 1 July 2015. The tax depreciation rate for plant is 20%. The plant sold on 30 June 2018 cost $66,667.

b) A tax deduction for development expenditure of 125% of the $120,000 spent during the year is available under income tax legislation. The profit before tax reflects the amount of development costs amortised in the current period.

c) Assume all depreciation rates are on a straight line basis.

d) Rent is assessed for tax when received in cash.

e) Actual amounts paid for insurance are allowed as a tax deduction.

f) No deduction is allowed for taxation purposes in relation to entertainment, fines and penalties.

g) Legal fees of $4,200 are capital in nature and non-deductible for tax purposes.

h) For tax purposes, restructuring costs are deductible only when paid.

i) The company pays tax in quarterly instalments. The following payments were made during the year ended 30 June 2018:

j) Except for the quarterly instalments above, no journal entries related to tax have been recorded for the year ended 2018. Assume the tax balances at 30 June 2017 are correct.

k) The tax rate is 30%.

  
Required:

1. Calculate the taxable income and current tax liability using an appropriate worksheet for the year ended 30 June 2018 (show all workings).

2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2018. Include all accounts and net balances where appropriate.

3. Prepare the journal entries to recognise the current tax liability, deferred tax assets and liabilities at 30 June 2018 calculated in 1. and 2.

The accounting profit before tax of Jameson Ltd for the year ended 30 June 2018 was $320,000. It included the following revenue and expense items:

The draft statement of financial position as at 30 June 2018 included the following assets and liabilities:

Additional information:

a) All plant was purchased on 1 July 2015. The tax depreciation rate for plant is 20%. The plant sold on 30 June 2018 cost $66,667.

b) A tax deduction for development expenditure of 125% of the $120,000 spent during the year is available under income tax legislation. The profit before tax reflects the amount of development costs amortised in the current period.

c) Assume all depreciation rates are on a straight line basis.

d) Rent is assessed for tax when received in cash.

e) Actual amounts paid for insurance are allowed as a tax deduction.

f) No deduction is allowed for taxation purposes in relation to entertainment, fines and penalties.

g) Legal fees of $4,200 are capital in nature and non-deductible for tax purposes.

h) For tax purposes, restructuring costs are deductible only when paid.

i) The company pays tax in quarterly instalments. The following payments were made during the year ended 30 June 2018:

j) Except for the quarterly instalments above, no journal entries related to tax have been recorded for the year ended 2018. Assume the tax balances at 30 June 2017 are correct.

k) The tax rate is 30%.

  
Required:

1. Calculate the taxable income and current tax liability using an appropriate worksheet for the year ended 30 June 2018 (show all workings).

2. Prepare the deferred tax worksheet to calculate the deferred tax asset and liability balances and adjustments for the year ended 30 June 2018. Include all accounts and net balances where appropriate.

3. Prepare the journal entries to recognise the current tax liability, deferred tax assets and liabilities at 30 June 2018 calculated in 1. and 2.

David Stern, Commissioner of the National Basketball Association (NBA), scanned the arena from his courtside seat at the sold out Toyota Center in Houston, TX during the 2004 Western Conference Playoffs game between the Houston Rockets and the Los Angeles Lakers. The video commercials and fan-response prompts he viewed on the high-tech scoreboard reminded him of how far technology had progressed since he first took the helm of the league in 1984. The NBA’s tremendous growth that stemmed from increased revenue opportunities through state-of-the-art facilities had begun to taper off since there was only one team left in the league that had yet to move into a modern arena. Now, the NBA leadership team spent much of its time pondering ways to offer fans alternative options to experience the NBA using cell phones, video games, and other innovative media channels of communication. While Stern contemplated how the league would continue to benefit from new technological advances, he noticed fans waving pictures of Yao Ming, a 7-foot 6-inch player from China. Stern’s global vision of the NBA was slowly coming to fruition through the recent influx of international players and the NBA’s initiatives to broadcast and market games internationally, yet he believed there was a much greater potential to be realized. Stern still had a few months to prepare for the annual Board of Governors meeting. In front of the NBA’s owners, Stern would deliver a “state-of-the-league” address and unveil a plan for confronting the league’s challenges and systematizing recommended changes across the league’s 30 teams. While the league was healthy on most fronts, team owners were recently alarmed after receiving reports indicating that revenues were down even though overall attendance had increased during the 2003- 04 season. Additionally, the league had just withstood several public relations disasters involving a few high-profile players and was facing the perception from many fans that the quality of play had diminished. Stern reflected on the competing demands and wondered how to prioritize and sort them out. The following morning, Stern would meet with Russ Granik, Deputy Commissioner and COO, and Adam Silver, President and CEO of NBA Entertainment, to begin thinking through a strategy. Just as Stern turned to Granik to remind him of the meeting, the crowd erupted as Yao Ming scored a last second shot to send the game into overtime. By 2003, the NBA had grown to include 29 teams, and had plans to expand to 30 teams in 2004.8 Each team was independently owned, either by an individual or by an ownership group. The NBA’s league office intended to work “for” the owners and was primarily responsible for operating the league.9 Revenue and costs for the league were largely driven by collective individual team activity. In 2002, 41% of the league’s revenue came from each team’s gate receipts, 45% from the league’s television contract with national television networks to broadcast NBA basketball games, and 12% from other sources including sponsorships, licensing partnerships, concessions, and preseason promoter fees.10 Of the league’s costs, over 63% were due to player salaries, which had escalated significantly over time (see Exhibit 1).11 The remainder of the league’s costs was split evenly among team basketball operations, promotions, arena rentals, and general & administrative costs.12 The league office was funded by 6% of each team’s gate receipts, and all other gate receipts were kept by each individual team.13 All national revenue—including licensing and national TV deals—was split evenly amongst all 29 teams.14 However, each team retained any local television revenue it generated.15 Over the years, the league had implemented a number of measures to control costs and distribute money equitably across the league. These measures were captured in a collective bargaining agreement (CBA), which is negotiated between the owners and players. In 2004 the league had a salary cap in place that attempted to “cap” the amount of money that each team spent on player salaries, generally at 55% of Basketball-Related Income (BRI, or the sum of gate receipts and national television revenue).16 However, there were numerous exceptions that enabled teams to exceed the cap in order to retain players. Although the league had numerous sources of revenues and costs, there were a handful of critical factors that drove the financial success of the NBA. The overriding factor, according to senior league management, was the quality of play and the excitement generated over the 82-game regular season and the post-season playoffs. Granik noted that “the key to this league is the public perception of our product, the quality of the games being played on the court, the level of competition between the teams, and the expertise of the athletes involved.”17 Mike Bantom, Senior Vice President of Player Development, summed up the league’s critical success factor as “exciting, competitive basketball games that would effectively compete against other entertainment options for the consumer.”18 Others tied the success of each team to its respective win-loss record. Bob Criqui, the league’s SVP of Finance, noted that “even more importantly than the win-loss record, a team must inspire hope among its fans. If a team’s fans believe that the team will be successful, the fans will actively cheer for the team, and come to watch the team’s games.”19 All mentioned that it was difficult to quantify or measure this critical success factor, but agreed that the excitement of the game translated into strong attendance, TV ratings, and scoring averages. Exhibits 2 and 3 present recent attendance levels and TV ratings for the league. Another success factor often cited by league executives was the image of its players, both on and off the court. Granik noted that “how people perceive our players is certainly an issue for us.” NBA League Office Overview The NBA league office, headquartered in New York City and Secaucus, NJ, consisted of five main entities—NBA League Operations, NBA Entertainment, NBA International, the WNBA, and the NBDL—which all reported to the Commissioner’s Office, led by Stern. Exhibit 5 presents the NBA organizational structure. NBA League Operations, headed by Granik, governed the basketball side of the league, including game scheduling and officiating, and oversaw league administrative duties, such as finance, human resources, and security. Other divisions, such as Player Development, worked closely with NBA teams to promote best practices and to ensure that teams adhered to league guidelines. NBA Entertainment, led by Silver, housed all revenue-generating properties at the league level, including the NBA Store and NBA TV. NBA International consisted of satellite offices situated to maximize revenue and marketing opportunities abroad. Similar to NBA League Operations, the WNBA and the NBDL offices served as governing bodies for their respective leagues. WNBA In the fall of 1996, the NBA launched the Women’s National Basketball Association (WNBA) as a wholly-owned subsidiary of the league so that the eight WNBA teams would be collectively owned by the NBA’s 29 owners, unlike NBA teams which were franchised individually to owners. Eight inaugural teams would begin play during the summer season of 1997 in the following NBA team cities: Charlotte, Cleveland, Houston, New York, Los Angeles, Phoenix, Sacramento and Utah. Although the WNBA league office managed many aspects of WNBA team operations such as negotiating player contracts and disbursing player salaries, the affiliated NBA teams were responsible for using existing resources and/or hiring employees to fulfill the league’s mandated operational and sales requirements. Within four years, the WNBA had expanded to 16 teams, all of which were affiliated with existing NBA teams. After the 2002 season, the league decided to shift WNBA team ownership from the NBA to each affiliated team. At this point, NBA owners were given the option to purchase and gain full control of their corresponding WNBA team. All the owners accepted the league’s offer with the exception of those in Portland, Orlando, Utah, and Miami. Subsequently, two of the teams relocated to other cities with owners who wanted a WNBA team, while the other two teams dissolved. Beginning in the 2004 season, the WNBA consisted of 13 teams. National Basketball Development League (NBDL) In the fall of 2001, the NBDL, a minor league wholly-owned by the NBA, became the league’s official training ground for team staff, officials, and players who met the minimum 20 year age requirement. The NBDL tipped off with teams in Asheville, NC; Charleston, SC; Columbus, GA; Fayetteville, NC; Greenville, SC, Huntsville, AL; Mobile, AL; and Roanoke, VA. NBA Board of Governors Major strategic decisions for the league were approved by the NBA’s Board of Governors. The Board of Governors comprised the owners of all 30 NBA teams, each of whom controlled a vote. David Stern was the Chairman of the Board, and the Board met twice annually. As the league became increasingly successful, the nature of the Board of Governors changed as team ownership changed hands. New owners such as Howard Schultz (Owner of the Seattle Supersonics and Chairman of Starbucks Coffee), Mark Cuban (Owner of the Dallas Mavericks and co-founder of Broadcast.com and current CEO of HDNet), and Joe and Gavin Maloof (Owners of the Sacramento Kings and Co-CEOs of Maloof Sports and Entertainment) began to take a more proactive approach to the management of their teams and their role on the Board of Governors. As Silver explained, “the biggest difference with the current Board of Governors is that we have much more substantive discussions about the business decisions of the league, which David actually encourages. We still have a ‘strong commissioner model’, we just have a much more active board. We now have owners on the board who spent $10 million on their team, and owners who have spent $300 million on their team. There is clearly going to be a difference in the demands from these two different sets of owners with regards to the direction of the league.” National Basketball Players Association (NBPA) The NBPA was the NBA players’ union that negotiated the Collective Bargaining Agreement (CBA) with the NBA. The CBA defined the rules of interaction between the players and the league on multiple fronts, including player compensation, conduct and appearances. As such, the NBA’s major product improvement and development recommendations were typically subject to approval by the NBPA, whose interests were not always aligned with the league’s and team owners. For instance, the league’s attempt to impose a harder player salary cap for purposes of increasing competitiveness across teams was met by extreme opposition from the NBPA during the 1998 collective bargaining period. This dispute, among others, ended after the longest ever NBA lock-out (strike). Consequently, the league suffered considerable financial losses from having to cut the regular season from 82 to 50 games and sustained substantial brand damage from negative media coverage. The NBPA provided its own set of programs and services to the players and, on occasion, would join forces with the NBA’s Player Development department to administer certain programs. All NBA league-mandated programs and appearances in which players participated were negotiated as part of the CBA. Superstar Turnover Much of the NBA’s popularity in the 1980s and 1990s was built on a handful of superstars. The NBA encouraged this by actively promoting its superstars, and turning their burgeoning popularity into booming ratings and attendance figures. Michael Jordan of the Chicago Bulls – perhaps the game’s greatest player and certainly its most popular player – joined the league in 1984 and continued playing until 199827 , after which returned to the league for 2 more seasons with the Washington Wizards in 2001-2003. The contests between Magic Johnson’s Los Angeles Lakers and Larry Bird’s Boston Celtics in the 1980s became one of sports’ greatest rivalries, as these two teams combined to win 8 of 10 NBA titles during the decade. Other charismatic superstars – such as Charles Barkley, Isiah Thomas, Julius “Dr. J” Erving, Dominique Wilkins, and Hakeem Olajuwon – propelled the NBA and created an exciting identity for the league. However, as these superstars began to retire in the early 1990s, the league struggled to identify comparable superstars to capture fans’ imagination in the same way. Fans constantly searched for the “next Jordan”, and throughout the 1990s players like Harold Miner, Jerry Stackhouse, Grant Hill and Vince Carter attempted to fill Jordan’s shoes only to fail. Although the NBA had its stars in the late1990s and early 2000s—including Shaquille O’Neal, Tim Duncan, Kevin Garnett, Kobe Bryant, Tracy McGrady, Allen Iverson and Jason Kidd—many fans were unable to connect to these players in the same way as the superstars of the 80s and early 90s. Was it just a matter of time until these players blossomed into the same types of superstars as those of the days of old, or did the existence of these new players require a different approach for the league? Negative Off-the-Court Image of NBA Players The league suffered incalculable damage to its image during a 6-month long work stoppage (better known as a “lockout”) of the players that eliminated 32 games from the 1998-99 NBA season as a result of contentious negotiations between the league office and the NBPA. After the lockout was finally settled, many felt the NBA as a whole had lost. Utah Jazz guard Jeff Hornacek said “I wouldn't blame the fans if they didn't come back…neither side is coming out of this thing looking good.”1 All in all, players lost $500 million in salaries, the NBA’s important corporate partners lost significant revenues (Nike reported a 50% drop in fiscal second quarter earnings and a 15% drop in revenues in December of 1998) (Motley Fool), and the NBA’s goodwill amongst fans and the general public was at an all-time low. As one fan stated in a Detroit News article in March 2000, “I hate the NBA and I'm not really a Pistons fan anymore. I'm sick and tired of the bitching players and owners. They're a bunch of big millionaire babies and I'm not going to pay to see them” (Detroit News). Other critical source for this section: The NBA continued to face image problems in 2003, when an ESPN poll revealed that the number one “problem” with the NBA, as perceived by its fans, was “player off-court behavior.” 39 A summary of the poll is presented in Exhibit 10. There were certainly a number of negative off-court incidents involving NBA players in the late 1990s and early 2000s that couldn’t be ignored, including: • All-Star Latrell Sprewell choking and threatening his coach, P.J. Carlesimo, during a practice in December 1997.40 • A scathing 1998 Sports Illustrated article revealing the significant number of paternity suits and out-of-wedlock births among professional athletes. The article mentioned several NBA superstars by name, including Larry Johnson, who was supporting five children by four women, and Shawn Kemp (drafted shortly after his high school graduation), who had fathered seven children out-of-wedlock. Other players highlighted in the article included NBA superstars Patrick Ewing, Juwan Howard, Scottie Pippen, Jason Kidd, Stephon Marbury, Hakeem Olajuwon and Gary Payton, Larry Bird, and Isiah Thomas. Kobe Bryant—three-time NBA champion and mega-superstar, high school draftee, married father with a young daughter—was arrested and charged with the sexual assault of a young woman at a hotel in Colorado during the 2003 off-season. In 2004, David Stern openly discussed plans to expand the league to Europe, noting that “it is not out of the realm of possibility that the NBA could have teams in Milan, Munich, Barcelona and London within a decade.” Many in the league office were excited at the possibility of brand-new revenue sources overseas—including international gate receipts, increased sponsorship and merchandising revenue from international companies and consumers, and a new source of television rights fees (or potentially broadcast-related revenues from NBA TV international telecasts). To many this expansion only seemed natural, and in some cases necessary. Stern noted “90% of our buildings are full at any given NBA game in the U.S…90%! Expansion overseas is the only way to grow this revenue source.” There was already cross-fertilization between the two markets, such as the increased number of international NBA superstars and the burgeoning popularity of NBA players and games in European and Asian markets. The NBA was already working on “seeding” these markets by holding exhibition games in international markets like China and Russia and expanding the presence of NBA TV, which was already in 30 countries in early 2004. Another open question was the future of the NBDL. While initially launched as a “training ground” for team staff, officials and players, many saw the opportunity to transform the NBDL into a true “minor league” for the NBA, which would operate similar to the minor leagues in Major League Baseball. Under this system, each NBDL would “belong” to one or two NBA teams, and the NBA team would have the ability to send a player down to their minor league team, or call them up when they needed a player, all the time retaining their contractual rights. Many saw this as an attractive option in order to handle the increasing number of high school and international players into the league. Upcoming Collective Bargaining Agreement Discussions Looming in the distance was a new collective bargaining agreement (CBA) to be negotiated with the NBPA. The current CBA was scheduled to expire after the 2004-2005 season, and all parties wanted to avoid a repeat of the lockout of 1999. Issues on the table included the percentage of revenues to be allocated to players and owners, the salary cap, the luxury tax, a potential age limit or a NBDL minor league, and any other issue that would have a direct impact on players. One NBA team president noted that one of the most important issues for the league going forward was “to find labor peace without bloodshed, so everyone is a little better off and teams have a chance to make money.” Decisions, Decisions Tomorrow, Stern, Granik and Silver would meet to begin planning for the upcoming gathering of the Board of Governors, where they would present the league’s strategic plan and the organizational requirements to support these strategic goals. As such, the three needed to discuss the competing priorities of the league’s stakeholders, and determine whose issues were most important to the future of the league. On the one hand, the trio would have to grapple with the serious issues that were undermining the league’s short-term vitality with certain segments of its fans. They would also have to address the concerns of the league’s ownership group and players association. Finally, Stern was eager to build consensus for his growth agenda. But how would the owners react to this proposal? How would this translate into the upcoming Collective Bargaining Agreement negotiations with the NBPA? And what systemic organizational changes were required to ensure that these recommendations would take root and sustain themselves across all 30 teams in the league? -------------------------------------------------------------------------------------------------------------------

1.What is the case about?

2.What are the important events that occurred in the case?

3.What can we learn from reading the case?

4.What advice do you have for the leaders in the case and/or company in the case?

Pleasanton Studios Kersten Brown, the CEO of Pleasanton Studios, is having a tough week - all three of her top management level employees have dropped in with problems. One executive is making questionable decisions, another is threatening to quit, and the third is reporting losses (again). Kersten is hoping to find simple answers to all her difficulties. She is asking you (her accountant) for some advice on how to proceed. Pleasanton Studios owns and operates three decentralized divisions: Entertainment, Streaming, and Parks. Pleasanton Studios has a decentralized organizational structure, where each division is run as an investment center. Division managers meet with the CEO at least once annually to review their performance, where each division manager's performance is measured by their division's return on investment (ROI). The division manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital. The Entertainment division manager, John Freeman, was the first to knock on Kersten's door this morning. Entertainment, Pleasanton Studios' first endeavor, produces movies for the big screen. Entertainment has been in operation since 1965. Last month, John had mentioned a proposal to build a new animation studio. The build would cost $4,910,000 with an estimated life of 20 years and no salvage value and would allow Entertainment to start producing animated movies. Animated movies were projected to bring in an additional $1,210,000 in revenues each year, but would increase annual production costs by $574,000. John had dropped in to let Kersten know he had decided not to move forward with the animation studio. This surprised Kersten - her quick mental calculation indicated that the studio would have a payback period of 8 years, much shorter than the expected life of the studio. Not entirely sure that her quick assessment was valid, Kersten needed to check with her accountant on the matter. Next to Kersten's door was the manager of Streaming, which produces short-form (30 minute to one hour) episodes in addition to streaming the movies developed by Entertainment. Customers then buy subscriptions to the service. Run by division manager Reyna Imanah, Streaming was introduced in 2016 and has increased subscriptions by 20% every year since. Reyna's complaint was that, based on the current bonus payout schedule, John Freeman's bonus last year was significantly higher than hers. She points to the increasing subscription rates at Streaming, and says that her division is being punished for having opened so recently (her division's facilities are much more recent than those in Entertainment). She currently has an employment offer from another company at the same base pay rate, and stated that she will accept this offer unless she feels her performance is being appropriately acknowledged and compensated. Kersten needs to look at the relative performance across divisions to determine how to proceed with Reyna. Pleasanton Parks is a theme park based on the movies from Entertainment and the series from Streaming. For many years, it was a popular year-round destination, with characters, rides, and a hotel. This park has lost popularity in recent years, and has been 'in the red' for the past two years. If the park is not profitable this year, you will need to decide whether to permanently close that division. Included in the 'Fixed COGS' for Parks is an annual $1,650,000 mortgage payment on the land and buildings for the park, which would still need to be paid (as a corporate level cost) if the park is closed and that segment is removed from the financial statements. Incidentally, you recently had a conversation with a Marriott Hotels executive, who would like to expand into the area. If you decided to close Parks, you are fairly certain that you could lease the hotel facilities to Marriott for $650,000 annually. A partial report of this year's financial results for Pleasanton Studios can be found in Table 1 below. The 'Selling and admin costs' listed in Table 1 are directly incurred by each division, and are determined at the beginning of each year (that is, they do not change with increased/decreased production). In addition to the divisional information above, there are $2,000,000 in corporate costs that are currently allocated evenly between the three divisions. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Parks division is closed, the decreased employee base would reduce allocated corporate costs by $500,000. Pleasanton Studios has a cost of capital of 12 percent (and Kersten uses the cost of capital as their required rate of return) and are subject to 32% income taxes. Before she can make any decisions, Kersten needs to evaluate this year's performance results. She sets off to see you, the company's accountant, for answers.

Table 1: Pleasanton Studios current year data Experience Streaming Parks Revenues $54,583,520 $30,184,570 $7,564,270 Fixed COGS $3,356,850 $4,074,530 $3,159,430 Variable COGS $40,257,310 $22,020,695 $3,698,928 # of customers 15,264,200 1,420,060 30,240 # of employees 11,562 1,954 1,378 Average net operating assets $29,014,000 $19,252,000 $420,000 Selling and admin costs $3,259,520 $944,620 $231,900  

b. Evaluate Entertainment's decision not to invest in the new animation studio (i.e., was the decision appropriate and in the best interests of Pleasanton Studios), including the appropriate financial analyses to support your evaluation. c. Evaluate the validity of Reyna Imanah's complaint regarding her evaluated performance. Explain why it is (or is not valid), and what further information would be necessary. d. Provide a recommendation on whether to close the Parks division, including all necessary financial analyses.