You have recently been hired as the assistant controller for Stanton Temperton C

Question

You have recently been hired as the assistant controller for Stanton Temperton Corporation, which rents building space in major metropolitan areas. Customers are required to pay six months of rent in advance. At the end of 2018, the company's president, Jim Temperton, notices that net income has fallen compared to last year. In 2017, the company reported before-tax profit of $330,000, but in 2018 the before-tax profit is only $280,000. This concerns Jim for two reasons. First, his year-end bonus is tied directly to before-tax profits. Second, shareholders may see a decline in profitability as a weakness in the company and begin to sell their stock. With the sell-off of stock, Jim's personal investment in the company's stock, as well as his company-operated retirement plan, will be in jeopardy of severe losses.
After close inspection of the financial statements, Jim notices that the balance of the Deferred Revenue account is $120,000. This amount represents payments in advance from long-term customers ($80,000) and from relatively new customers ($40,000). Jim comes to you, the company's accountant, and suggests that the firm should recognize as revenue in 2018 the $80,000 received in advance from long-term customers. He offers the following explanation: “First, we have received these customers' cash by the end of 2018, so there is no question about their ability to pay. Second, we have a long-term history of fulfilling our obligation to these customers. We have always stood by our commitments to our customers and we always will. We earned that money when we got them to sign the six-month contract.”
Required: Discuss the ethical dilemma you face. What is the issue? Who are the parties affected? What factors should you consider in making your decision? w Insert Format Tools Table Window Help a ACC 202 Et- a-search in Document K- (5 orr sert Design Layout References Mailings Review View A Styles Styles Styles Pane ACC 202 Ethics Case Directions Your Ethics Case is AP 3-5 on p. 163 of your textbook. To get full credit, make sure to write with good spelling and grammar. Also, make sure to use the ethical framework described on p. 24 of your textbook to structure your response. Finally, make sure to double-space your Word document. Please submit your Ethics Case in the appropriate folder on Blackboard by class time on Monday, October 1.

Explanation / Answer

In the given siuation, the profit of the company has fallen from $330000 in year 2017 to $280000 in year 2018. Mr jim president is very concerned about it as his year end bonus and his value of stocks in compant would decline as shareholder will sell the stock. So mr. Jim want to recognise the advance recieved from the long term customer which is in the deffered revenue account of $80000 as income for current year as he says it is recieved from long term customer. Mr. Jim is not correct at his position as he wants to recognise the revenue for which his company has not done the work yet, which is against revenue recognising principle and will lead to false picture of the corporation. The persons affected will be the stakeholders of the corporatiin. As the assistant controller of the corporation i want allow such thing to be done.

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