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I need some help answering these two accounting ethics case problems. Please answer each question with one solid paragraph.

I need some help answering these two accounting ethics case problems. Please answer each question with one solid paragraph.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I need some help answering these two accounting ethics case problems. Please answer each question with one solid paragraph.

Ethics Case 13-16 Outdoors R USLO13-1 Outdoors R Us owns several membership-based campground resorts throughout the Southwest. The company sells campground sites to new members, usually during a get-acquainted visit and tour. The campgrounds offer a wider array of on-site facilities than most. New members sign a multiyear contract, pay a down payment, and make monthly installment payments. Because no credit check is made and many memberships originate on a spur-of-the-moment basis, cancellations are not uncommon. Business has been brisk during its first three years of operations, and since going public in 2012. the market value of its stock has tripled. The first sign of trouble came in 2024 when new sales dipped sharply. One afternoon, two weeks before the end of the fiscal year, Diane Rice, CEO, and Gene Sun, controller, were having an active discussion in Sun's office. Sun: Rice: I've thought more about our discussion yesterday. Maybe something can be done about profits. I hope so. Our bonuses and stock value are riding on this period's performance. Sun: We've been recording deferred revenues when new members sign up. Rather than recording liabilities at the time memberships are sold, I think we can justify reporting sales revenue for all memberships sold. Rice: What will be the effect on profits? Sun: I haven't run the numbers yet, but let's just say very favorable. Required: 1. Why do you think liabilities had been recorded previously? 2. Is the proposal ethical? 3. Who would be affected if the proposal is implemented? Ethics Case 18-8 The Swiss label maker; value of shares issued for equipment LO18-4 Bricker Graphics is a privately held company specializing in package labels. Representatives of the firm have just returned from Switzerland, where a Swiss firm is manufacturing a custom-made high speed, color labeling machine. Confidence is high that the new machine will help rescue Bricker from sharply declining profitability. Bricker's chief operating officer, Don Benson, has been under fire not reaching the company's performance goals of achieving a rate of return on assets of at least 12%. The afternoon of his return from Switzerland, Benson called Susan Sharp into his office. Susan is Bricker's Controller. Page Benson: I wish you had been able to go. We have some accounting issues to consider. Sharp: I wish I'd been there. too. I understand the food was marvelous. What are the accounting issues? Benson: They discussed accepting our notes at the going rate for a face amount of $12.5 million. We also discussed financing with stock. Sharp: I thought we agreed; debt is the way to go for us now. Benson: Yes, but I've been thinking. We can issue shares for a total of $10 million. The labeler is custom made and doesn't have a quoted selling price, but the domestic labelers we considered went for around $10 million. It sure would help our rate of return if we keep the asset base as low as possible. Required: 1. How will Benson's plan affect the return measure? What accounting issue is involved? 2. Is the proposal ethical? 3. Who would be affected if the proposal is implemented?
Transcribed Image Text:Ethics Case 13-16 Outdoors R USLO13-1 Outdoors R Us owns several membership-based campground resorts throughout the Southwest. The company sells campground sites to new members, usually during a get-acquainted visit and tour. The campgrounds offer a wider array of on-site facilities than most. New members sign a multiyear contract, pay a down payment, and make monthly installment payments. Because no credit check is made and many memberships originate on a spur-of-the-moment basis, cancellations are not uncommon. Business has been brisk during its first three years of operations, and since going public in 2012. the market value of its stock has tripled. The first sign of trouble came in 2024 when new sales dipped sharply. One afternoon, two weeks before the end of the fiscal year, Diane Rice, CEO, and Gene Sun, controller, were having an active discussion in Sun's office. Sun: Rice: I've thought more about our discussion yesterday. Maybe something can be done about profits. I hope so. Our bonuses and stock value are riding on this period's performance. Sun: We've been recording deferred revenues when new members sign up. Rather than recording liabilities at the time memberships are sold, I think we can justify reporting sales revenue for all memberships sold. Rice: What will be the effect on profits? Sun: I haven't run the numbers yet, but let's just say very favorable. Required: 1. Why do you think liabilities had been recorded previously? 2. Is the proposal ethical? 3. Who would be affected if the proposal is implemented? Ethics Case 18-8 The Swiss label maker; value of shares issued for equipment LO18-4 Bricker Graphics is a privately held company specializing in package labels. Representatives of the firm have just returned from Switzerland, where a Swiss firm is manufacturing a custom-made high speed, color labeling machine. Confidence is high that the new machine will help rescue Bricker from sharply declining profitability. Bricker's chief operating officer, Don Benson, has been under fire not reaching the company's performance goals of achieving a rate of return on assets of at least 12%. The afternoon of his return from Switzerland, Benson called Susan Sharp into his office. Susan is Bricker's Controller. Page Benson: I wish you had been able to go. We have some accounting issues to consider. Sharp: I wish I'd been there. too. I understand the food was marvelous. What are the accounting issues? Benson: They discussed accepting our notes at the going rate for a face amount of $12.5 million. We also discussed financing with stock. Sharp: I thought we agreed; debt is the way to go for us now. Benson: Yes, but I've been thinking. We can issue shares for a total of $10 million. The labeler is custom made and doesn't have a quoted selling price, but the domestic labelers we considered went for around $10 million. It sure would help our rate of return if we keep the asset base as low as possible. Required: 1. How will Benson's plan affect the return measure? What accounting issue is involved? 2. Is the proposal ethical? 3. Who would be affected if the proposal is implemented?
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