Sundream Travel Agency Ltd is a company that sells

vacation #8542
Sundream Travel Agency Ltd. is a company that sells vacation packages and has a new Chief
Executive Officer (CEO) who is reviewing the draft December 31 year-end financial statements
prepared by the company's controller. On these statements, the current assets total $400,000
while the current liabilities total $210,000, which results in a current ratio of 1.9:1. Several
months ago, the company obtained some new bank financing that requires it to maintain a
current ratio of at least 2:1. After reviewing the statements, the CEO suggests that the controller
change the financial statements for two transactions.The first transaction involves a vacation
package that was sold to a ski club. The vacation starts in two months' time, in early March, and
the club has paid $12,000 in advance for the trip. Since the cash has been received, the CEO
suggests that the credit relating to this transaction be shown in sales revenue.The second
transaction relates to an accrual of $3,000 for December interest expense that is not due until
early January. The CEO suggests that this accrual should not be made since the interest is not
due until next year.Instructions(a) Who are the stakeholders in this situation?(b) How will
agreeing to the CEO's request have an impact on the financial statements?(c) Is the CEO acting
in an ethical manner? Why?(d) In what way does the existence of accounting standards
enhance ethical behaviour?View Solution:
Sundream Travel Agency Ltd is a company that sells vacation

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