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Happy Trails Limited is a popular family resort just outside Yellowstone National Park. Summer is the resort?s busy season, but guests typically pay a deposit at least six months in advance to guarantee their reservations.
The resort is currently seeking new investment capital in order to expand operations. The more profitable Happy Trails appears to be, the more interest it will generate from potential investors. Ed Grimm, an accountant employed by the resort, has been asked by his boss to include $2 million of unearned guest deposits in the computation of income for the current year. Ed explained to his boss that because these deposits had not yet been earned they should be reported in the balance sheet as liabilities, not in the income statement as revenue. Ed argued that reporting guest deposits as revenue would inflate the current year?s income and may mislead potential investors.
Ed?s boss then demanded that he include $2 million of unearned guest deposits in the computation of income of be fired. He then told Ed in an assuring tone, Ed, you will never be held responsible for misleading potential investors because you are just following my orders.

Instructions
Should Ed Grimm be forced to knowingly overstate the resort?s income in order to retain his job? Is Ed?s boss correct in saying that Ed cannot be held responsible for misleading potential investors? Discuss.

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Among the ledger accounts used by Glenwood Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the following items, provide the journal entry (if one is needed) to record the initial transaction and provide the initial transaction and provide the adjusting entry, if any, required on 31 May, the end of the fiscal year.
A. On I May borrowed $300,000 cash from National Bank by issuing a 12 percent note payable due in three months.
B. On 1 May paid rent for six months beginning 1 May at $30,000 per month.
C. On 2 May sold season tickets for a total of $910,000 cash. The season includes 70 racing days: 20 in May, 25 in June, and 25 in July.
D. On 4 May an agreement was reached with Snack-Bars Limited, allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales.