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 multi-year 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 2000, the market value of its stock has tripled. The first sign of trouble came in 2013 when the 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: I've thought more about our discussion yesterday. Maybe something can be done about profits.Rice: I hope so. Our bonuses and stock value are riding on this period's performance.Sun: We've been recording unearned 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.
Consider these questions:Why do you think liabilities had been recorded previously?
Is the proposal ethical?
Who would be affected if the proposal is implemented?
Do you agree with your classmates' responses?© BrainMass Inc. brainmass.com October 10, 2019, 8:08 am ad1c9bdddf
The response addresses the query posted in 404 words with APA references
//In the following paragraphs, there will be a discussion over the revenue recognition policy of Outdoors R Us regarding the membership fees. There will be consideration of accounting standards and accounting principles for the ethical issues in recording revenue over the multiple accounting periods. There will also be consideration of IAS 18 provisions for the recognition of revenue.//
As per the IAS 18 on Revenue, the revenue can be recognized when the services have been provided. It indicates the advance receipt for providing services cannot be recognized as revenue until the services for the same have been provided (IAS 18 - Revenue, 2015). The ...
The expert examines outdoors R Us ethics. The response addresses the query posted in 404 words with APA references.