The Point Athletic Club
Not what you're looking for?
The Point Athletic Club offers one-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, The Point advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Kevin Harrison, corporate controller, recognized revenue ratably over the life of the membership.
The Point is in the process of preparing its year-end financial statements. Rodney Williams, The Point's operations manager, is concerned about the company performance this year. He reviews the financial statements Kevin prepared and tells him to recognize membership revenue when the fees are received.
Respond to the following questions:
1. What are the ethical issues in this situation?
2. What arguments can you make for recognizing revenue at the time of sale?
3. What do you think Kevin should do?
Purchase this Solution
Solution Summary
The Point Athletic Club offers one-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, The Point advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Kevin Harrison, corporate controller, recognized revenue ratably over the life of the membership.
Solution Preview
1. The main ethical problem in this situation is that Rodney has told Kevin to record an accounting transaction that is against GAAP and illegal. Rodney can't suddenly change accounting policies in order to increase the company's financial performance. It is deceitful and will produce misleading financial statements that will be used by investors and other decision makers. If Kevin agrees to make the changes as requested, it will ...
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Operations Management
This quiz tests a student's knowledge about Operations Management
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.