ACCTBA1 INDIVIDUAL BUSINESS CASE (3% of midterm grade)

Term 2, Academic Year 2016-2017

Adapted from: Williams, J.R. et al. (2015). Financial Accounting: International Financial Reporting Standards
Second edition. McGraw-Hill Education (Asia).

HOT & COLD

Hot & Cold, owned by Aiza Tee, is a popular family resort in Bulacan. Summer is the resorts busy
season but guests typically pay a deposit at least six months in advance to guarantee their reservations.
With the construction of the Metro Rail Transit Line 7 (MRT-7) which will connect Quezon City to
Bulacan, Aiza is expecting more guests and therefore is currently seeking more funds and new
investments in order to expand operations. The more profitable the resort appears to be, the more it
will generate interest from potential investors.

Joe Reyes, an accountant employed by the resort and a personal acquaintance of the owner, has been
asked by Aiza to include P200,000 of unearned guest deposits in the computation of this years income.
Joe explained to Aiza that because these deposits had not yet been earned, they should be reported in
the statement of financial position as liabilities, and not in the income statement as revenues. He further
explained that reporting guest deposits as revenue would inflate this years income and may mislead
investors. Aiza then demanded that Joe include P200,000 of unearned guest deposits in the
computation of income or be fired. She then told Joe in an assuring tone, Joe, you will never be held
responsible for misleading potential investors because you are just following my orders.

Guide Questions:
1. Who are the stakeholders (affected parties) in this situation?
2. What is/are the ethical issue/s in this case?
3. If you were Joe, would you follow the owners orders in order to retain your job? Explain.
4. Is Aiza correct that Joe cannot be held responsible for misleading potential investors? Explain.
5. What would you have done differently, if any? (You may look at this from any
characters/stakeholders perspective.)

Format:
Short bond paper (8.5x11)
1.5 paragraph line spacing
One inch margin on all sides
One page only
Font: Tahoma 11
Deadline: February 22, 2017 (MW class); February 23, 2017 (TH class)
The heading and content of the submitted case analysis are as follows:
SURNAME, GIVEN NAME M.I. ACCTBA1 Section___
ID# Date

Individual Business Case: Hot & Cold

Start with an introduction.

The next paragraphs should focus on answering the guide questions.

End with a conclusion and/or recommendation.

Cite references, whenever necessary. Please observe integrity.

The criteria for grading the case analysis are as follows:

CRITERIA EXEMPLARY SATISFACTORY DEVELOPING BEGINNING
(100) (90) (80) (70)
Content and The student applies The student applies The student applies The student fails to
Application all relevant ACCTBA1 some ACCTBA1 few ACCTBA1 topics apply ACCTBA1
[80%] topics appropriately topics appropriately appropriately topics
to the business case. appropriately
Format and The student follows The student follows The student follows The student does not
Use of the format and has the format and uses the format but uses follow format and
English not one spelling/ only the English a mixture of Filipino uses a mixture of
Language grammatical error in language in the and English language Filipino and English
[20%] the paper. paper which is at an in the paper and/or language in the
acceptable level. uses the English paper and/or uses
language somewhat the English language
inappropriately. inappropriately.