Financial Accounting Principles and Analysis
Essay by Kill009 • October 4, 2011 • Case Study • 446 Words (2 Pages) • 2,691 Views
Financial Accounting Principles and Analysis
Ethical Analysis of Lakeside Slammers, Inc.
Financial Statement
By
October 19, 2010
Problem 3.
On the basis of the revised financial statements I am now facing fraud. The information regarding the season ticket revenue does not provide reliable information to an outsider. Revenue is recognized when both of the following are met; revenue is earned or revenue is realized. Because 2008 season tickets are for 2008 games by definition this revenue has not been earned in 2007, the games have not been played. Therefore 2008 season ticket revenue will not result in revenue in 2007. This revenue is considered to be unearned revenue.
The $100,000 advertising revenue on the income statement does not represent the underlying economic reality of the transaction. The recognition of $100,000 in advertising revenue should not be have been recorded because revenue is recognized when both of the following conditions are met, revenue is earned or revenue is realized. Lakeside only average 1500 fans per game not the estimated 2000 fans per game. Therefore the revenue was not realized and should not have been recorded until it is realized.
Due to my strong ethical beliefs it is my responsibility to share all revisions with the other three owners of the company to maintain continued trust and honesty. My responsibility to the bank is to make sure that they are paid in full.
Problem 4
In the long run the owners of Lakeside will benefit, why they are a new team and not yet established and therefore will struggle until they become known and make a name for themselves and then the profits will start rolling in.
The right of future dividend or earning can be violated. The interest of the owners and the major league franchise may create a conflict. The minor league team is required to pay $5000 every year to the major league for all 25 players on the roster. My responsibilities and obligations are to see that the agreements in the contract are met. While the information provided by the organization is relevant I do not think it is reliable, or accurately represents what it claims to report and is unbiased. The items on the balance sheet entitled Auxiliary Assets and the value of the controller's personal residence should not have been reported on the company financial statement. The controller personal residence is not an asset to the company. The Business is a separate entity unto itself
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