Retainer Fees as Sales

Bunch o' Balloons markets balloon arrangements to companies that want to thank clients and employees. Bunch o' Balloons has a unique style that has put it in high demand. Consequently, Bunch o' Balloons has asked clients to establish an account. Clients are asked to pay a retainer fee equal to about three months of purchases. The fee will be used to cover the cost of arrangements delivered and will be reevaluated at the end of each month. At the end of the current month, Bunch o' Balloons has $43,900 of retainer fees in its possession. The controller is eager to show this amount as sales because ''it represents certain sales for the company.''

Required

Use the Ethical Decision Framework in Exhibit 1-9 to complete the following requirements:

1. Recognize an ethical dilemma: What ethical dilemma(s) do you face?

2. Analyze the key elements in the situation:

a. Who may benefit from using the second appraisal? Who may be harmed?

b. How are they likely to benefit or be harmed?

c. What rights or claims may be violated?

d. What specific interests are in conflict?

e. What are your responsibilities and obligations?

3. List alternatives and evaluate the impact of each on those affected: What are your options in dealing with the ethical dilemma(s) you identified in (1) above

4. Select the best alternative: Among the alternatives, which one would you select?