Cross Timbers Energy Co. is in its third year of operations, and the company has grown. To expand the business, Cross Timbers borrowed $15 million from Bank of Fort Worth. As a condition for making this loan, the bank required that Cross Timbers maintain a current ratio of at least 1.50 and a debt ratio of no more than 0.50.
Business recently has been worse than expected. Expenses have brought the current ratio down to 1.47 and the debt ratio up to 0.51 at December 15. Lane Collins, the general manager, is considering the result of reporting this current ratio to the bank. Collins is considering recording this year some revenue on account that Cross Timbers will earn next year. The contract for this job has been signed, and Cross Timbers will deliver the natural gas during January of next year.

Requirements
1. Journalize the revenue transaction (without dollar amounts), and indicate how recording this revenue in December would affect the current ratio and the debt ratio.
2. Analyze this transaction according to the decision framework for making ethical judgments in Chapter 1:
a. What is the issue?
b. Who are the stakeholders and what are the alternatives? Weigh them from the standpoint of economic, legal, and ethical implications.
c. What decision would you make?
3. Propose for Cross Timbers a course of action that is ethical.