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Week 6 Chapter 18-9 (ACCT-311) - Answer the Following...

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C LASS C ONFERENCES : C ONCEPTS F OR A NALYSIS Week #6 Chapter 18 (CA 18-9): Revenue Recognition – Membership Fees Question: Midwest Health 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, MHC 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, Richard Nies, corporate controller, recognized revenue ratably over the life of the membership. MHC is in the process of preparing its year-end financial statements. Rachel Avery, MHC's treasurer, is concerned about the company's lackluster performance this year. She reviews the financial statements Nies prepared and tells Nies to recognize membership revenue when the fees are received. Instructions:
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Unformatted text preview: Answer the Following Questions a) What are the ethical issues involved? b) What should Nies do? a) When a company reports their finances with reports or statements, it must be handled with integrity and honesty. Nies’s position represents the General Accepted Accounting Practices. The financial statements must be reported and presented fairly. Avery’s way of handling the financial statement is not being presented accordingly and fairly. There are many investors and creditors who rely on such statements will be mislead and lied to. b) Hack should make sure that the statements are presented fairly and accordance with GAAP. Nies should be prepared to find alternative means if Avery doesn’t accept Nies’s position. Nies should seek people in higher positions at Midwest and found out what could be done....
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