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Why did the CEO request the adjustment to the deposit

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Reference no: EM133008399

Question - Sally Fields is the controller of Budget Charters, a publicly traded company. The company sells vacation packages and has a new CEO, Jeff Goldstar. Jeff is reviewing the draft December 31, 2020 year-end financial statements prepared by Sally. On these statements, the current assets total $399,000 while the current liabilities total $210,000.

The company's bank financing requires Budget Charters to maintain a current ratio of at least 2:1. After reviewing the statements, Jeff suggests that Sally make the following change regarding a vacation package that was sold to a CPA members club. The vacation starts in March 2021, and the club paid a deposit of $30,000 in advance of the trip. Because the cash has been received by the 2020 year end, the CEO suggests that the deposit be shown in revenue instead of deferred revenue.

Required -

(a) Name two financial statement users in this scenario and explain the financial reporting objective for each user.

(b) Why did the CEO request the adjustment to the deposit?

(c) Does the CEO's request pose an ethical dilemma for the controller? If so, why?

Reference no: EM133008399

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