The case study,


· Read the question closely; be sure you know what is being asked. Briefly, indicated the facts of the case and write a brief outline of what you want to fit into your 3 pages.

· Identify the dilemma: explain the ethical issue and support for alternative choices. Contrast reasons using prepositions: benefit/consequences of doing or not doing

· Explain the benefits/ consequences in terms of who, when, dollar amount, and certainty positive and negative consequences. Consider long run versus short run consequence.

· Choose one position and explain the reason it is more ethical than the alterbatives refuting your support for the other positions. Where there is a dilemma, explain why ethical support for one choice is better than support for the other choices. Explain why this case is important.

Case also can be found at the attached PDF file page 257.

Please use the knowledge related to the book. No outside resource allowed.


“Yeah, I know all of the details weren’t completed until

January 2, 2014, but we agreed on the transaction on

December 30, 2013. By my way of reasoning, it’s a continuation

transaction and the $12 million revenue belongs in the

results for 2013.” This comment was made by Carl Land, the

CFO of Family Games, Inc. The company has annual sales of

about $50 million from a variety of manufactured board and

electronic games that are designed for use by the entire family.

However, during the past two years, the company reported

a net loss due to cost-cutting measures that were necessary to

compete with overseas manufacturers and distributors.

Land made the previous comment to Helen Strom, the

controller of Family Games, after Strom had expressed her

concern that because the lawyers did not sign off on the transaction

until January 2, the revenue should not be recorded in

2013. Strom emphasized that the product was not shipped

until January 2 and there was no way of justifying its inclusion

in the previous year’s operating results.

Land felt that Strom was being hypertechnical because

the merchandise had been placed on the carrier (truck) on

December 31, 2013. The items weren’t shipped until January 2

because of the holiday. “Listen, Helen, this comes from

the top,” Land said. “The big boss said we need to have the

$12 million recorded in the results for 2013.”

“I don’t get it,” Helen said to Land. “Why the pressure?”

“The boss wants to increase his performance bonus by

increasing earnings in 2013. Apparently, he lost some money

in Vegas over the Christmas weekend and left a sizable IOU

at the casino,” Land responded.

Helen shook her head in disbelief. She didn’t like the idea

of operating results being manipulated based on the personal

needs of the CEO. She knows that the CEO has a gambling

problem. This sort of thing had happened before. The difference

this time is that it has the prospect of affecting the

reported results, and she is being asked to do something that

she knows is wrong.

“I can’t change the facts,” Helen said.

“All you have to do is backdate the sales invoice to

December 30, when the final agreement was reached,” Land

responded. “As I said before, just think of it as a revenuecontinuation

transaction that started in 2013 and, but for one

minor technicality, should have been recorded in 2014.”

“You’re asking me to ‘cook the books,’ ” Helen said. “I

won’t do it.”

“I hate to play hardball with you, Helen, but the boss

authorized me to tell you he will stop reimbursing you in

the future for child care costs so that your kid can have a

live-in nanny 24-7 unless you are a team player on this issue.

Remember, Helen, this is a one-time request only.” Land said.

Helen was surprised by the threat and dubious of the

“one-time-event” explanation. She sat down and reflected on

the fact that the reimbursement payments for her child care

were $35,000, 35 percent of her annual salary. She is a single

working mother. Helen knows that there is no other way that

she can afford to pay for the full-time care needed by her

autistic son.


1. Briefly discuss the rules for revenue recognition in accounting

and how they pertain to this case. Does the proposed

handling of the $12 million violate those rules? Be


2. Assume Carl Land is a CPA and Helen Strom holds the

Certificate in Management Accounting (CMA). What

ethical issues exist for them in this situation? Identify the

stakeholders in this case and Strom’s ethical obligations

to them.

3. To what extent should Helen consider the gambling problems

of her boss in deciding on a course of action? To

what extent should Helen consider her child care situation

and the threatened cutoff of reimbursements? If you were

Helen, what would you do given the directions from Carl

Land. Why?

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