Exercise 2/ week 4 What motivates sales executives and finance and accounting executives to participate In actively that result In Inaccurate reporting of revenues? Most people In sales tend to get a bonus or higher pay if they meet their quota at the end of the term or month. In some cases if they are unable to do so they can loose their Job.

In the past, why was it argued that Apple should spread the recognition of phone revenue over a two- year period, rather than recording it upfront?Apple made a promise when selling the hones that there would be updates constantly so with the average estimated life of the phone being two years they figured making It two years until they record the Information It would help with recording all the updates and what follow them. Suppose that Robert Jones purchases a 4100 gift card at Best Buy on December 24, 2011, and gives it to his wife, Mary Jones, on December 25, 2011. On January 3, 2012, Mary uses the card to purchase $1 00 worth of CDC.When do you think Best Buy should recognize revenue and why? Companies are suppose to recognize revenue when It Is earned and because the money has not been spent up until then it would have made It a liability rather than an earned revenue.

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When she goes and spends the money and leaves with merchandise then they should post on It then. Accrual accounting is often considered superior to cash accounting. Why, then, were some people critical of Chinas use of accrual accounting in this instance?China normally uses money transactions so because this was unusual for them to do it makes people eel nervous about them trying a different way and it seems too inconsistent.