CASE 6-1 (LO6.2, LO6.6, LO6.7, LO6.8, LO6.9, LO6.11, LO6.12, LO6.14) SOLAR POWER INC. Solar Power Inc. (SPI) is a public company manufacturing and distributing solar panels. It has been in existence for the past ten years, of which the last three have been as a public company. To date SPI has experienced good growth rates, slightly higher than industry averages. Historically, the company had only been a distributor of solar panels and solar power consulting. However, due to the high demand for solar panels and a potentially growing market in Canada, management decided to open their own manufacturing facility in Canada. In order to finance this growth, the company obtained a bank loan. The maximum amount of the loan outstanding at any time cannot exceed three times the company's last 12 months' EBITDA (earnings before interest, taxes, depreciation, and amortization). The company is required to file interim statements with the banker so that EBITDA can be monitored. SPI primarily sells two types of products: RHP-1 and CSP-2. RHP-1 products are solar panels that the company manufactures for residential use only. These products are sold primarily to individual home owners and home builders. The panels come in five different sizes suitable for installation on residential house roofs. CSP-2 products are solar panels imported from a German supplier and sold to the commercial market for use on large commercial buildings. For these products, SPI acts as a distributor. The panels come in eight sizes. Both types of products can be installed either when the building is being constructed or any time after the completion of the building. The company sells all of the accessories required to install these panels. to install these panels. SPI also provides services for installation and consulting. In most cases, installation is for the products SPI sells, although the company has started to provide installation services to other solar panel sellers in the industry. Consulting contracts are generally performed for companies looking for energy cost reduction solutions. During 20X9, SPI entered into the following contracts: 1. On 16 March, SPI signed a contract with Sharone Co. for a total of $4 million. Sharone was building a new addition to its manufacturing facility and has decided to install solar panels to reduce its annual operating electricity costs. The contract price includes the CSP-2 solar panels, installation, a two-year warranty, and a five-year maintenance agreement that starts as soon as installation is completed. Separate selling prices for the panels and installation and a one-year maintenance contract are $3,200,000 for the panels and installation and $300,000 each year for the maintenance contract. Generally, the panels can be installed within four months of the date the contract is signed. A nonrefundable deposit of 10% of the contract is due on signing. Another 75% is due on delivery and installation. The remaining 15% is due six months or later after the installation date when all deficiencies have been resolved. Delivery and installation was completed on 31 August 20X9. The warranty is for assurance that the product will work within