Assume that it is December 31, the last day of the fiscal year, and you are an internal accountant for Saturday Night Accessories, a privately owned company run by the Blues Brothers, that provides personal services to consumers.
On that date, a $1.2 million major contract for one year of future services is received. You are instructed by your supervisor who reports to the "Brothers" to record the full amount of the $1.2 million as revenue on December 31. You know that management will receive a bonus for the boosted revenue and you will receive recognition in an upcoming performance review.
Questions
1. What is the proper way to account for the revenue in this case? Why?
2. How might you go about convincing your supervisor of the proper accounting? That is, what factors might enable you to get your point across, and what are disablers that might prevent you from achieving that result?
3. Under what circumstances might you consider going to the "Brothers" to discuss the matter?