Sunny Energy Applications Co. sells solar-powered swimming pool heaters. Sunny contracts 100% of the work to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sunny Energy Applications Co. sells solar-powered swimming pool heaters. Sunny contracts 100% of the work to other companies. As Sunny is a new company, its balance sheet has total assets of $78,000, including $24,000 of "stock subscriptions receivable." The largest asset is $42,000 worth of "unrecovered development costs." The equity side of the balance sheet is made up of $78,000 of "Common Stock Subscribed." The company is contemplating a public offering to raise $1 million. The shares to be sold to the public for the $1 million will represent 40% of the then issued and outstanding stock. There are two officer-employees of the company, Mike Whale and Willie Float. Whale and Float are former officers of Canadian Brass Co. Float is being sued by the SEC for misusing funds raised by Canadian Brass in a public offering. The funds were used as compensatory balances for loans to a Physics Inc. Physics Inc. was controlled by Float and is the predecessor for Sunny Energy Applications. Canadian Brass is being sued by the SEC for reporting improper (exaggerated) income. Float was chief executive at the time. There are many organizations engaged in researching the feasibility of using solar energy. Most of the organizations are considerably larger and financially stronger than Sunny Energy. The company has not been granted any patents that would serve to protect it from competitors. REQUIRED a. What potential risks may be present in this engagement? b. What specific auditing and accounting problems appear to exist? c. What additional information do you feel you need to know about the company? d. Do you believe the engagement should be accepted or rejected? Why? Sunny Energy Applications Co. sells solar-powered swimming pool heaters. Sunny contracts 100% of the work to other companies. As Sunny is a new company, its balance sheet has total assets of $78,000, including $24,000 of "stock subscriptions receivable." The largest asset is $42,000 worth of "unrecovered development costs." The equity side of the balance sheet is made up of $78,000 of "Common Stock Subscribed." The company is contemplating a public offering to raise $1 million. The shares to be sold to the public for the $1 million will represent 40% of the then issued and outstanding stock. There are two officer-employees of the company, Mike Whale and Willie Float. Whale and Float are former officers of Canadian Brass Co. Float is being sued by the SEC for misusing funds raised by Canadian Brass in a public offering. The funds were used as compensatory balances for loans to a Physics Inc. Physics Inc. was controlled by Float and is the predecessor for Sunny Energy Applications. Canadian Brass is being sued by the SEC for reporting improper (exaggerated) income. Float was chief executive at the time. There are many organizations engaged in researching the feasibility of using solar energy. Most of the organizations are considerably larger and financially stronger than Sunny Energy. The company has not been granted any patents that would serve to protect it from competitors. REQUIRED a. What potential risks may be present in this engagement? b. What specific auditing and accounting problems appear to exist? c. What additional information do you feel you need to know about the company? d. Do you believe the engagement should be accepted or rejected? Why?
Expert Answer:
Answer rating: 100% (QA)
1 tentil risks resent in this enggement The mny uld just be erted s shell mny withut ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Customer profitability Ring Delights is a new company that manufactures custom jewelry. Ring Delights currently has six customers referenced by customer number 01, 02, 03, 04, 05 and 06. Besides the...
-
Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of...
-
Riondel Inc. is a new company that assembles laptop computers from parts bought from manufacturers around the world. The company makes three different models; except for the computing power and some...
-
The firm is considering between two mutually exclusive projects, Project A and Project B, that each require an upfront investment of $100m and are expected to produce free cash flow (FCF) only at the...
-
What steps can you take to establish a good credit rating?
-
Define reliability engineering.
-
The average pressure and shear stress acting on the surface of the 1-m-square flat plate are as indicated in Fig. P9.4. Determine the lift and drag generated. Determine the lift and drag if the shear...
-
The American supply and demand curves for potatoes cross at $5 a pound, but potatoes are available in any quantity from abroad at $2 a pound. Each week, American sellers produce 500 pounds of...
-
Convers Corporation (calendar year-end) acquired the following assets during the current tax year: (ignore 179 expense and bonus depreciation for this problem): (Use MACRS Table 1, Table 2, and Table...
-
After retiring as a physician, Bob Guthrie became an avid downhill skier on the steep slopes of the Utah Rocky Mountains. As an amateur inventor, Bob was always looking for something new. With the...
-
In this problem we investigate Gaussian elimination of matrices with complex entries. Consider the following matrix and vector 3i+1 4i 16 -5i-2 - B = 4i+1 4i - 20-6i-2 C = 2i 2i+1 5i - 12 -5i-3] i...
-
What are the five characteristics of a well-written judicial opinion? Explain.
-
Suppose you are a purchase manager who is the contract administrator for a major consulting firm installing a major enterprise resource planning system such as SAP or Oracle. What are some of the key...
-
A processor (quad core) can speed up a computing system by a factor of 4 but this rarely happens. Use Amdahls Law to compute the percentage of program execution that needs to be distributed across...
-
Explain the problems associated with the imposition of capital controls.
-
An effort has a start and completion planned within one accounting period. What techniques would be recommended? and Why?
-
Locate a report or article of an employee terminated due to off-duty behavior. Provide a summary of the incident, the applicable laws or policies, and any legal action taken by the employee, if...
-
A circular concrete shaft liner with Youngs modulus of 3.4 million psi, Poissons ratio of 0.25, unconfined compressive strength 3,500 psi and tensile strength 350 psi is loaded to the verge of...
-
At a distance of 1.60 m from a point charge of +2.00 C, there is an equipotential surface. At greater distances there are additional equipotential surfaces. The potential difference between any two...
-
A person lowers a bucket into a well by turning the hand crank, as the drawing illustrates. The crank handle moves with a constant tangential speed of 1.20 m/s on its circular path. The rope holding...
-
Starting from rest a 93-kg firefighter slides down a fire pole. The average frictional force exerted on him by the pole has a magnitude of 810 N, and his speed at the bottom of the pole is 3.4 m/s....
-
A \(0.40-\mathrm{m}\) wire carries a current of \(1.7 \mathrm{~A}\) and is at angle to a \(0.20-\mathrm{T}\) uniform external magnetic field. What must be the angle between the wire and the magnetic...
-
A square loop of side \(a=50 \mathrm{~cm}\) is suspended from the left arm of a scale, which is kept at equilibrium by adding weights to the right side. The lower half of the loop is in a uniform...
-
A square loop of wire has a perimeter of \(60 \mathrm{~cm}\) and is oriented such that two of its parallel sides form a \(30^{\circ}\) angle with the horizontal. A uniform horizontal magnetic field...
Study smarter with the SolutionInn App