qsn

paulacase xexample x
 

need half a page to 3/4’s a page on an Intro for a case

Attached is the document an example of an intro in a recent case that I highlighted it’s half a page. The link leads to the case and the “paula case” doc is everything answered so far. Basically integrate the purpose background and road map of the questions.

Purpose: I think we are the head of Paula;s paette’s department addressing her issues

Background: The incident

Road Map: each in depth how each ties into each other

http://www.csun.edu/sites/default/files/paulas-pal…

 

PAULA’S PALETTE – QUESTIONS

Suppose you are Bob Roy. You have just confirmed that, for all practical purposes, Mrs. Park will be unable to work at all during the next ten years, including all of 2006. Write a report, addressed to Jack Smith, Chief Administrator of Paula’s, which covers the questions below. Be sure to follow the guidelines for writing a report found in the Gateway Web Site.

Q. 1. The data from Exhibit 3 is also in the Excel file income.xls on the course website. Use Excel, along with this file, to determine Mrs. Park’s real income for the last fifteen years. Do this by first converting each price index from percent by dividing by 100. Then, divide gross income by your converted (adjusted) price index. Using Excel, find the mean, median, standard deviation, and variance of her past real income. Explain the meaning of these statistics. Can you use mean income to forecast future earnings? Take into account both statistical and non-statistical considerations.

This spreadsheet analyzes Mrs. Park’s real income from 1991-2005. The statistics regarding the mean, median, standard deviation, and variance are explained as follows. The mean in other words is the average real income Mrs. Park has earned over the years. The median is described as the middle point of a number set. In this case it is Mrs. Park’s real income. This is an alternative way of finding the average amount she has earned. The standard deviation explains how close are far apart the real income values are from each other. The standard deviation found from her real income is small, meaning the total real incomes are close to each other from one year to the next. Mean income can be used to forecast future earnings due to having an average number and knowing that future income can range around that number. It can also fluctuate higher or lower than that which can help estimate future earnings.

Q. 2. How do you interpret the price indices in Exhibit 3? How do economists construct them? Use Excel regression to analyze the relationship between the adjusted price index (dependent variable and year (independent variable). Interpret your regression findings by discussing the coefficient of determination (R-square), the regression coefficient, the regression equation, and the p value. Can you use the regression equation to predict the price indices? Take into account statistical, macroeconomic, and other considerations.

Q. 3. Assume that Mrs. Park’s real income will not change over the next ten years. Use the mean real income from question 1 to determine projected real income for the future ten years of Mrs. Park’s work expectancy. Use the regression equation from question 2 to project adjusted price indices for the next ten years. Assume that Mrs. Park pays 20% of her actual income in taxes and that Green will not provide significant state assistance. Use the projected real income and adjusted price indices to estimate Mrs. Park’s net actual income for the next ten years. What would be the likely amount of an award to Mrs. Park based on a present value rate of 8%? Discuss the factors that could cause Mrs. Park’s future income to differ from your estimate.

Y = a + (Gross income from current year)-(gross income)

Q. 4. Would the merchant’s defense relieve Paula’s Palette from liability under the cause of action of false imprisonment? (Brandon)

No, Nancy Park was wrongfully detained in a room for about an hour which was when the manager of the store was suppose to come back from their meeting. Since she was restricted from leaving without any legal justifications, the store Paula’s Palette had caused false imprisonment. In the letter Park asks why she was being detained and the employee would not say why only to wait for the manager. She then offered to empty her pockets and that was then she was released upon the manager’s arrival.

Q. 5. Assuming that Paula’s Palette is liable for false imprisonment and assuming that Mrs. Park is deemed unable to locate another job for life due to her present medical condition, is a court likely to award her compensation for loss of future income? What standard will a court consider in determining whether Mrs. Park is entitled to compensation? In your opinion, is Mrs. Park’s settlement offer reasonable? Is she entitled to anything else in her damage claims? Support your opinions with a discussion of the legal and practical possibilities. (CHRISTIAN)

Mrs. Parks is likely entitled to compensation for future income due to her medical condition as the store was the direct cause of her injuries. In result, her condition unables her to do the basic functions of her job and is in a loss of her dependent income as shown in (Exhibit 3). The courts are likely to considering store negligence on account of the dangerous conditions they amounted into detaining her as well as the fact that she was not visually seen shoplifting. Her compensation does seem quite outrageous at first, however, the amount she is claiming as a 55-year old with no future income due to the injuries is quite reasonable. Her claims to cover medical costs seems reasonable as well as she is said to have a irreparable back issue and a permanent disability.

Q. 6. What actions would you recommend should be taken to prevent a reoccurrence of a situation similar to that involving Mrs. Park? What company policies need to changed or added? Discuss the relevant management issues.

DATE: March 7, 20

1

7

TO: MV-Link

FROM: TEAM #7: Christian Paris, Angelo Junio, Brandon Hualde, Brianna Beltran, Alex Gonzalez, Gregory Medina

RE: Legal and Financial Accounting Analysis and Consultation for the dispute between MV-Link and PACE

Based off our evaluation, we have organized an analysis towards PACE’s actions regarding the distribution and exhibition of Kombat Rex I-V. For any further questions or additional information feel free to contact us.

1

EExecutive Summary

This detailed report explains the complications between the producer and distributor MV-Link and the movie theatre company PACE Theatres, Inc.

Legal Analysis: Due to the language and lack of clarity of the contract, some of the terms may have been misunderstood by both sides. The main problem arises from the exclusivity of portion of the contract. For the purpose of this report we analyze both sides regarding the exclusive rights on the showing of the movies, Kombat Rex I-V. We go in more in depth on whether or not there was a breach of contract between either parties on the exclusivity rights and what the contract of the $5,000,000 was actually for. Depending on what the $5,000,000 payment was for, it changes the expectations and could either make the argument over geographical limitation stronger of weaker.

Financial Accounting Analysis: For the Financial Accounting Analysis we examine the principle of GAAP, examining the revenues and cash flows that should have been accounted when the December 31 audit was released. According to the financial analysis, PACE is not playing the right amount of showings based on our calculations.

Recommendation:  We recommend MV-Link to pursue a revision and extension of the contract Kombat Rex I-V. Giving them another 2 months with a minimum of 9 showings for Kombat Rex II-V each.

Introduction

After examining the situation between MV-Link and PACE, there is a conflict regarding both sides not fulfilling their legal obligations. Based on the agreement, PACE is granted the overall rights to display the five films Kombat Rex I thru V with MV-Link receiving $5,000,000, in payable and $2,500,000 upon contract signature and $2,500,000 within a 6-month period starting on September 1, 2006. Following $500 for each film showing in each location. PACE is given a limit to the amount of showings for KR I, and are required to fulfill a minimum of showings for the sequels II-V, while being the exclusive sole source of the movie involving no outside markets. Based on the month of December, the amount of money, $5,462,500 sent by PACE is not up to par of how many showings they should be exhibiting.

Legal In Depth Analysis

There must be a clarification between the exclusive rights to Kombat Rex I thru V, within PACE theaters. Are MV-Link’s actions not applicable since it was advertised outside the U.S. market or have they committed a breach of contract by marketing their movie to a competitor with PACE losing the exclusivity they agreed upon?

Breach of Contract: In order to see if there is a breach of contract, one party had to have reasonable expectations to be fulfilled, and the other must have not fulfilled those expectations. For PACE, they expected that MV-Link would “grant exclusive screening rights” becoming the “sole source.” For MV-Link, the expectations were that PACE would play Kombat Rex at a maximum of 42 times and the accompanying sequels with a minimum of 18 times for each of the 4 movies.

MV-Link’s Side: MV-Link believes there were was no breach of contract by marketing the movie outside of PACE’s market and competition. Based on the contract, there was no indication geographically of which markets were involved.

PACE’s Side: PACE is arguing that since MV-Link advertised the movie well-within the agreed 6-month period within the competitive market that they have breached the contract by not maintaining the exclusivity of the movie with solely PACE.

Agreement Evaluation and the Purpose of the $5,000,000 Total: Upon the agreement, PACE paid a total of $5,000,000, a payable of $2,500,000 upon contract signature, and another $2,500,000 on September 1, 2006. Due to lack of clarity of what the $5,000,000 is for, PACE may have a stronger or weaker argument about exclusive rights depending on what this total was for. The strength of PACE’s geographical limitation argument will vary depending on what the $5,000,000 was intended for. The 3 expectations are if the $5,000,000 was for 1) The exclusive right to the films, 2) The signing of the contract, 3) Additional amounts for showing films.

The Exclusive Right to the Films: If the purpose of the $5,000,000 was for exclusive rights to the films, PACE’s no geographical limitation argument would be considered exceptionally strong. Because it was PACE’s full expectation that they would be the “sole source,” geographical limitation would not matter, even if the competing theaters were out of their market. It would appear that MV-Link breached the contract in this case.

The Signing of the Contract: If the purpose of the $5,000,000 was for the contract signing, the PACE’s no geographical limitation argument would be fairly strong, but not as strong as the first expectation of exclusive rights to the films. The contract states that PACE’s would be “the sole source, without competition from other theaters in the market, during the contract period.” This would allow MV-Link to argue that they are marketing outside of PACE’s market by promoting in Canada because all of their theaters are located in the U.S.

Additional Amounts for Showing Films: If the purpose of the $5,000,000 was for additional amounts for showing films, then PACE’s no geographical limitation argument would be weakest of the 3, because the $5,000,000 would then be focused solely on being able to just play the films with less implications of exclusivity.

Financial Accounting in Depth Analysis

Generally Accepted Accounting Principles (GAAP): According to the Generally Accepted Accounting Principles (GAAP), Revenues are recognized and earned when 1) products are exchanged for cash or claims to cash, 2) related assets received are convertible to cash, 3) products are delivered/ services performed. Recognition is the process of recording an item into a financial statement. Realization is the process of converting non-cash resources into cash.

Revenue vs. Cash Flow: Revenue is the amount earned by providing goods and service to customers. Cash flow is the amount of cash received, they increase your bank balance for spending. Evaluating revenue would be more accurate by giving a detailed list of the amount of showings and the amount of exhibition fees they should be paying.

GAAP’s Application: GAAP applies to PACE’s exhibition fees by processing financial statements needed to apply the revenue amongst PACE and MV-Link. The revenue ($5,462,500) that was realized on December 31 was accurate and it was the correct amount of revenue for their showings. Unfortunately, under in depth analysis, it would appear that PACE is falling behind in their showings for KR II-V. Given a full breakdown of expected total exhibition fees, this is an estimate of what PACE would pay by the end of the contract:

Breakdown of Expected Exhibition Fees When 6 Month Contract is Complete

Source:

Number of Times to be Shown

Number Of Theaters Shown In

Revenue Per Showing

Total Revenue

KR

42

475

$500

$9,975,000

KR II

18

475

$500

$4,275,000

KR III

18

475

$500

$4,275,000

KR IV

18

475

$500

$4,275,000

KR V

18

475

$500

$4,275,000

Total Expected

–

–

–

$27,075,000

Given that the audit report was given during December, to be on track with the contract, PACE would have to have exhibition fees ⅔’s of the $27,075,000, which would be around 18,050,000. This means for the audit statement given, PACE is falling behind around $12,407,500. Isolating the revenues for the sequels, it is very clear that PACE is not doing well in showing KR II-V. The following chart below details the expected revenues for KR II-V only.

Expected minimum revenues for KR II-V on December 31, 2006

Source:

Number of Times to be Shown

Number Of Theaters Shown In

Revenue Per Showing

Total Revenue

KR II

18×2/3

475

$500

$2850,000

KR III

18×2/3

475

$500

$2850,000

KR IV

18×2/3

475

$500

$2850,000

KR V

18×2/3

475

$500

$2850,000

Total Expected Minimum

(as of 12/31/06)

–

–

–

$11,400,000

*** 2/3 is the factor that represents the first 4 months of the contract. ***

When recognizing revenues, it is important to detail and recognize when revenues should be taken account for. Since the contract is 6 months long, and the audited statement was approximately ⅔’s of their contract time on December 31, 2006, the number of times shown has been fractioned off to represent what PACE should be paying at this point. PACE is expected to play each of the 4 equals 18 times, which means they should have played each around 12 times by this point. PACE is far off and there is a large gap and the next chart details approximately how far behind PACE is as of December 31, 2006.

Estimate of how far behind PACE is at this point of the contract for the minimum showings per movie:

Expected exhibition fees for 12/31/06

$11,400,000

Actual exhibition fees for 12/31/06

$1,187,500

How far behind PACE is as of 12/31/06

$10,212,500

According to the audited statement as of 12/31/2006, PACE is far behind what they should be making in regards to the agreed minimum of 18 showings per movie. Another way of looking at the calculation could be by taking the revenue in the audited statement ($1,187,500), dividing it by the exhibition fee ($500), dividing it by the amount of movies (4), and dividing that number by the estimated number of theatres (475) The calculation would then look like this:

($1,187,500/500)/4/475 = 1.25times shown per movie theater

$1,187,500: Amount Due

2,375: number of times shown (as of December 31,2009)

4: KRII-V

475: approximate number of theaters

According to the calculations, PACE has played KR II-V approximately 1.25 times per movie theater. Having only 2 months left in their contract, PACE has an overwhelming gap that they must fill before February. It is clear that PACE is not interested in playing the sequels according to the contract. If they do not pay for the amount due for exhibition fees by the end of February, PACE could be found with a breach of contract on their end for failing to play each movie at a minimum of 18 times.

Conclusion and Recommendations

This report assessed the legal standards of PACE’s demands for reparations before filing a lawsuit against MV-Link on the claims of a Breach of Contract. Based on the agreement between both parties the contract states that PACE agreed to display MV-Link’s Kombat Rex I-V a specific amount of times with the exception of being the exclusive movie holder within the market. PACE’s grounds towards MV-Link is the fact they marketed the movie in Canada, however Canada is outside PACE’s competitive market in the U.S. In addition to the this, our data suggests that the amount of expected revenue required to be generated for the sequels of Kombat Rex, being around $11,400,000 does not equate to the amount that PACE is currently on track of which is a mere $1,187,500, which is equal to about 1 or 2 showings per movie opposed to the required 18. Our team strongly suggests MV-Link to pursue a revision and extension of the contract so Kombat Rex I-V is displayed for an additional 2 months with an absolute minimum of 9 showings for Kombat Rex II-V.