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Q2. Wintz Publishing House produces consumer magazines. The House and Home Division, which sells home-improvement and home-decorating magazines, has seen a 20% reduction in operating income over the past 9 months, primarily due to an economic recession and a depressed consumer housing market. The divisions controller, Happy Franklin, has felt pressure from the CFO to improve her divisions operating results by the end of the year. Franklin is considering the following options for improving the divisions performance by year-end: (a.) Cancelling two of the divisions least profitable magazines, resulting in the layoff of 25 employees. (b.) Selling the new printing equipment that was purchased in January and replacing it with discarded equipment from one of the companys 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 fiscal year-end) instead of showing it as a liability. (d.) Recognizing advertising revenues that relate to January in December. Which of the forgoing year-end actions are clearly in conflict with the IMA Statement of Ethical Standards and should be viewed as unacceptable because of their potential harm to investors? (2 point)

Options a and c

Options a and d

Options c and d

Options b and d

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