Oakland Limited owns a chain of golf courses. Members sign multiyear membership packages, with increasing payments in later years of the contract. Revenue is recognized evenly over the membership term, regardless of the cash flow pattern. The operating activities section of the SCF for the past two years is as follows:

Required:
1. Does the above analysis suggest high quality of earnings? Explain.
2. Suggest two accounting policies that would contribute to lower quality of earnings, based on the adjustments above.

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OAKLAND LIMITED Statement of Cash Flows 20X3 20X2 Cash flows from operating activities Earnings for the period Adjustment for: $36,000 31,500 41,700 (3,600) (4,200) 7,400 Decrease (increase) in other working capital accounts (17,400) 9,300 (1,000) Depreciation and amortization (Gains)/losses on sale of assets Decrease/(increase) in accounts receivable Increase/(decrease) in unearned revenue 32,500 (2,300) (3,300) 61,100 (8,200) 6,900 Deferred income tax Other Net cash from operating activities $68,200 $117500