At the end of the year, Caribbean Cruise Lines reports current assets of $10.1 million and current liabilities of $10 million. These amounts include advanced payments of $1 million from customers in December for the cruises to be provided the following summer. Instead of treating the $1 million as deferred revenue, Eugene decided to count the cash received as revenue in order to make the current ratio higher. He reasoned that cash has already been collected and the company has a long history of providing cruises, so customers will be provided their cruise as scheduled.

a)Recognizing revenue before providing service is acceptable, as long as nobody finds out outside the company.

b)Recognizing revenue before itis earned is notethical and violates GAAP.

c)As past experience shows, the company always meets it obligation and it is acceptable to record the revenue immediately and improve the current ratio.

d)Eugene is helping the company and should be promoted.