A contract in which the vendor (seller) agrees to convey the title to the real property after the vendee (buyer) has met certain

Complete Question:

James Stilton serves as the CEO of RightLiving, Inc., a corporation that purchases life insurance policies at a reduced price from terminally ill individuals and sells them to investors. RightLiving compensates terminally ill patients with a percentage of the future death benefits (typically 65%) and subsequently sells the policies to investors for 85% of the future benefit amount. The patients receive funds to assist with their medical and other expenses, while the investors are assured a positive return on their investments. The difference between the purchase and retail prices represents RightLiving's profit.

Stilton is aware that some sick patients might acquire insurance policies through deceit (by concealing their illness on the application). If an insurance company uncovers such fraud, it will annul the policy and withhold payment. While Stilton is confident that most of the policies he has acquired are legitimate, he recognizes that a few may not be.

Requirement:

What additional ethical dilemmas might Stilton encounter?

Answer with Explanation:

Stilton's ethical challenges include:

• Should he disclose potential fraud to investors prior to executing sales?
• What policies should be established to ensure that legitimate individuals can easily sell their policies, and how would lack of such policies be unfair for RightLiving, Inc.?
• Stilton also faces ethical issues because the business model benefits from the early deaths of clients, which raises moral questions.

Answer:

The solution and relevant data for the exercise are contained within three images. The maximum profit amounts to 262.500.

Explanation

Please take into account the details provided in the exercise. Should you have any queries, feel free to reach out again. All the exercises are illustrated within three images.

Response:

Details:

The journal entry for the payment received on April 13 from a customer is recorded as:

Date Account title and explanation Ref Debit Credit

Apr-13 Cash ($5000 - $150)                  $4,850  

         Sales discount ($5000* 3%)      $150  

                    Accounts receivable

                                                                            $5000

(To document the payment received from the customer after discount    

Answer:

Based solely on the provided information, the answers are:

a. The accounts receivable balance reported on the December 31, Year 1, balance sheet will be $4,000.

b. A net income of $18,000 will be recorded on the Year 1 income statement.

c. A net cash flow of $14,000 from operational activities will be shown on the Year 1 cash flow statement.

d. Retained earnings amounting to $18,000 will appear on the Year 1 balance sheet.

Explanation:

a.

Service revenue recorded on account for Year 1 totaled $18,000

Cash collected from accounts receivable during Year 1 amounted to $14,000

Thus, on December 31, Year 1, the accounts receivable balance stands at $18,000-$14,000 = $4,000

b. Only the $18,000 service revenue earned within Year 1 will be reported on the income statement.

c. The cash transaction recorded for the year sums to $14,000 received from customers, which is reflected in the Year 1 cash flow statement.

d. The retained earnings indicated on the Year 1 balance sheet amount to $18,000