Slammers Inc. is a minor league baseball organization that has just completed its first season. You and three other investors organized the corporation; each put up $10,000 in cash for shares of capital stock. Because you live out of state, you have not been actively involved in the daily affairs of the club. However, you are thrilled to receive a dividend check for $10,000 at the end of the seasonan amount equal to your original investment. Included with the check are the following financial statements, along with supporting explanations:

Lakeside Slammers Inc Income Statement For the Year Ended December 31, 2016
Revenues:
Single Game ticket Revenue	$420,000
Season Ticket Revenue	140,000
Concessions Revenue	280,000
Advertising Revenue	100,000	940,000
Expenses:
Cost of concessions sold	$110,000
Salary Expenses: players	225,000
Salary and Wage Exp: staff	150,000
Rent Expense	210,000	695,000
Net Income		245,000
Lakeside Slammers Inc Statement of Retained Earnings For the Year Ended December 31, 2016
Beginning Balances, Jan 1, 2016	$0
Net Income for 2016	245,000
Cash Dividend paid in 2016	(40,000)
Ending Balance, Dec 31, 2016	205,000
Lakeside Slammers Inc Balance Sheet December 31, 2016
Assets
Cash	$5,000
Account Receivable:
Season Tickets	140,000
Advertisers	100,000
Auxiliary assets	80,000
Equipment	50,000
Player contracts	125,000
Total Assets		500,000
Liabilities and Stockholder's Equity
Notes Payable	$50,000
Capital Stock	40,000
Additional Owners' Capital	80,000
Parent Club's Equity	125,000
Retained Earnings	205,000
Total Liabilities and Stock Equity		500,000

Additional Information:

1. Single-game tickets sold for $4 per game. The team averaged 1,500 fans per game. With 70 home games X $4 per game X 1,500 fans, single-game ticket revenue amounted to $420,000.
2. No season tickets were sold during the first season. During the last three months of 2016, however, an aggressive sales campaign resulted in the sale of 500 season tickets for the 2017 season. Therefore, the controller (who is also one of the owners) chose to record an Account Receivable: Season Tickets and corresponding revenue for 500 tickets X $4 per game X 70 games, or $140,000.
3. Advertising revenue of $100,000 resulted from the sale of the 40 signs on the outfield wall at $2,500 each for the season. However, none of the advertisers have paid their bills yet (thus, an account receivable of $100,000 on the balance sheet) because the contract with Lakeside required payment only if the team averaged 2,000 fans per game during the 2016 season. The controller believes that the advertisers will be sympathetic to the difficulties of starting a new franchise and will be willing to overlook the slight deficiency in the attendance requirement.
4. Lakeside has a working agreement with one of the major league franchises. The minor league team is required to pay $5,000 every year to the major league team for each of the 25 players on its roster. The controller believes that each of the players is an asset to the organization and has therefore recorded $5,000 X 25, or $125,000, as an asset, called Player Contracts. The item on the bottom of the balance sheet entitled Parent Club's Equity is the amount owed to the major league team by February 1, 2017, as payment for the players for the 2016 season.
5. In addition to the cost described in item 4, Lakeside directly pays each of its 25 players a $9,000 salary for the season. This amount--$225,000has already been paid for the 2016 season and is reported on the income statement.
6. The items on the balance sheet entitled Auxiliary Assets on the top and Additional Owners' Capital on the bottom represent the value of the controller's personal residence. She has a mortgage with the bank for the full value of the house.
7. The $50,000 note payable resulted from a loan that was taken out at the beginning of the year to finance the purchase of bats, balls, uniforms, lawn mowers, and other miscellaneous supplies needed to operate the team. (Equipment is reported as an asset for the same amount.) The loan, with interest, is due on April 15, 2017. Even though the team had a very successful first year, Lakeside is a little short of cash at the end of 2016 and has asked the bank for a three-month extension of the loan. The controller reasons, "By the date of April 15, 2017, the cash due from the new season ticket holders will be available, things will be cleared up with the advertisers, and the loan can be easily repaid."

Required:

1. For each of the items of additional information, identify any errors you think the controller has made in preparing the financial statements. What ethical dilemma(s) do you now face?
2. Analyze the elements:
3. Who may benefit or be harmed?
4. How are they likely to benefit or be harmed?
5. What rights or claims may be violated?
6. What specific interests are in conflict?
7. What are your responsibilities and obligations?
8. As one of the investors in this organization, what are your options in dealing with the ethical dilemma(s) identified?