Hi Erylee,

Could you please help me with answers to this problem?

1. From theviewpoint of a member of the board of directors that addresses the proposed changes, what are the future ramifications of those changes on the company?

2.What ethical issues related to the proposed changes?

Be sure to discuss the impact of the proposed changes on cash, taxes, and the future of the company.

SILVER CLOUD COMPUTING ACCT 551 Midterm Case Study Due: Monday, October 17, 2016 Total Points Available: 150 You are a member of the board of directors of Silver Cloud Computing, a new company that provides cloud computing services. The company began operations on October 1, 2016. It acquired financing from the issuance of common stock for $55,000,000 and long-term debt for $80,000,000. The following projected income statement and balance sheet was prepared by the external accountant prior to the start of operations. All amounts are in thousands. Silver Cloud Computing Projected Income Statement First Year of Operations (in thousands) Sales Expenses: Wages and salaries Bad debt expense Depreciation Marketing Expense Occupancy Expense Research and Development Total Expenses Operating income before bonus Bonus Operating income Interest expense Income before taxes Income taxes (40%) Net income $495,000 $225,000 4,000 50,000 40,000 110,000 60,000 489,000 6,000 600 5,400 4,000 1,400 560 $ 840 Silver Cloud Computing Projected Balance Sheet September 30, 2017 (in thousands) Assets: Cash Accounts receivable, net of allowance of 4,000 Net computer equipment Total assets Liabilities & Shareholders' Equity: Accounts payable Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity $ 3,940 36,000 100,000 $139,940 $ 4,100 80,000 55,000 840 $139,940 A Chief Executive Officer (CEO) was hired just prior to the commencement of operations. After examining the projections for the first year, the CEO presented the following suggestions and revised projected income statement to the board of directors at their meeting at the beginning of the year. 1. Decrease research and development expenditures from $60 million to $25 million. 2. Increase the estimated lives of the computer equipment from 3 years to 6 years which will decrease depreciation expense from $50 million to $25 million. 3. Reduce the allowance for doubtful accounts from 10% of accounts receivable to 5% of accounts receivable. Following is the revised projected income statement for Year 1 proposed by the CEO using the alternative accounting procedures and operating decisions. (in thousands) Sales Expenses: Wages and salaries Bad debt Depreciation Marketing Expense Occupancy Expense Research and development Total Expenses Operating income before bonus Bonus Operating income Interest expense Income before taxes Income taxes (40%) Net income $495,000 $225,000 2,000 25,000 40,000 110,000 25,000 427,000 68,000 6,800 61,200 4,000 57,200 22,880 $ 34,320 Additional notes: The president's compensation package at Silver Cloud Computing is a $1,000,000 salary with a cash bonus of 10% of operating income before the bonus. Original depreciation of the computers was calculated using straight-line depreciation over a 3 year period with no salvage value. The taxes and bonus are paid with cash. Required: Write a 5 - 7 page APA formatted paper from the viewpoint of a member of the board of directors that addresses the proposed changes, the future ramifications of those changes on the company, and any ethical issues related to the proposed changes. Be sure to discuss the impact of the proposed changes on cash, taxes, and the future of the company. Provide a minimum of three references. Direct quotes should be limited to one per page. Please review the rubric for the minimum requirements and grading outline. Due Monday, October 17, 2016 at 11:59 PM