Assignment Background

Sam and Barry Johnson, who are brothers, own all the outstanding stock of RB Johnson Electric (the Company), an electrical contractor headquartered in Norfolk, Virginia. The Company was founded by the current owners' father in December of 1947 and has been in continuous operation since that date. The Company performs commercial electrical construction for small to medium size commercial projects in the Hampton Roads area of Virginia. The Company employs about 50 people and for the most recent year ended December 31, 2021, had approximately $50 million in contract revenues and a book value of less than $3,000,000.

During both 2021 and 2022 the Company experienced significant losses on two large projects related to electrical construction for two apartment complexes. The reasons for the losses are varied but both projects were largely impacted by the Company's inability to find and employ qualified electricians and project managers for the projects. In addition, both projects were multi-story buildings, and the Company has very little experience in this type of construction. Further, management of the Company bid the two projects very aggressively to establish an ongoing relationship with this general contractor and a belief that the Company needed to increase its backlog.

The Company's bookkeeper has prepared the following trial balances for the Company as of August 31, 2022, and 2021, the Company's year-end. To avoid any issues of independence with your firm, the Company employs another CPA firm to adjust its accounts monthly. This service, based on your prior experience with the Company, provides accurate information as of and for the period presented.

8.31.22 8.31.21 Cash 30,000 Cash 75,000 Accounts receivable 75,000 Accounts receivable 650,000 Retainage receivable 10,000 Retainage receivable 405,000 Contract assets 1,000,000 Contract assets 875,000 Property and equipment 450,000 Property and equipment 450,000 Accumulated depreciation 450,000 Accumulated depreciation 450,000 Accounts payable 275,000 Accounts payable 100,000 Other accrued liabilities 25,000 Other accrued liabilities 20,000 Contract liabilities 875,000 Contract liabilities 20,000 Line of credit bank 2,000,000 Line of credit bank Long term debt 75.000 Long term debt 0 Common stock 2,000 Common stock 2,000 Retained earnings 1,863,000 Retained earnings 2,138,000 Contract revenues 45,000,000 Contract revenues 45,000,000 Cost of contract revenues 47 500,000 Cost of contract revenues 43,000,000 General and administrative expenses 1,500,000 General and administrative expenses 2,275,000 50,565,000 50,565,000 47,730,000 47,730,000