135 Professional ethics and end-of-year actions. Phoenix Press produces consumer magazines. The house and home division, which sells home-improvement and home-decorating magazines, has seen a 15% reduction in operating income over the past 15 months, primarily due to an economic recession and a depressed consumer housing market. The division's Controller, Sophie Gellar, has been pressurized by the CFO to improve her division's operating results by the end of the year. Gellar is considering the following op- tions for improving the division's performance by the end of the year: a. Cancelling three of the division's least profitable magazines, resulting in the layoff of 30 employees. b. Selling the new printing equipment that was purchased in February and replacing it with discarded equipment from one of the company's other divisions. The previously discarded equipment no longer meets current safety standards. c. Recognizing unearned subscription revenue (cash received in advance for magazines that will be delivered in the future) as revenue when cash is received in the current month (just before the fiscal year-end), instead of depicting it as a liability. d. Reducing liability and expenses related to employee pensions. This would increase the division's operating income by 5%. e. Recognizing advertising revenues that relate to February in December. f. Delaying maintenance on production equipment until January, although it was originally scheduled for October. 1. What are the motivations for Gellar to improve the division's year-end operating earnings? 2. From the point of view of the "Standards of Ethical Behavior for Practitioners of Management Account- ing and Financial Management," Exhibit 1-7 (page 37), which of the preceding items (a-f) are accept- able? Which of the aforementioned items are unacceptable? 3. How should Gellar handle the pressure to improve performance? I and of unar actinne Linda Rutler in