What Should We Tell the Stockholders?
Technology Unlimited, Inc., uses a fiscal year ending June 30. The auditors completed their review of the 2008 financial statements on September 8, 2008. They discovered the following subsequent events between June 30 and September 8.
(a) Technology split its common stock 2 for 1 on August 15. Prior to the split, Technology had outstanding 100,000 shares of $1 par common stock.
(b) A major customer, Diatride Company, declared bankruptcy on August 1.The customer owed Technology $75,000 on June 30.No payment had been received as of September
8. It is estimated that creditors will receive only 15% of outstanding claims.
(c) Technology completed negotiations to purchase Liston Development Labs on July 18.
The purchase price was $525,000 in cash and a 4 year, $250,000, 10% note.
(d) A $750,000 lawsuit against Technology was filed on August 15. It is too early to measure the loss potential.
(e) A general decline in stock market values for technology stocks occurred during the first week of September. Technology Unlimited’s market value per share Dr. opped from $42.50 to $28.00 in this week.
The auditors have requested that you prepare the subsequent event note that should accompany the financial statements for the year ending June 30, 2008. Only those events that require disclosure should be included in your note. Justify the exclusion of any events from your note.