Discussion Question Part 1
Select ONE of the scenarios below and explain the best solution. Include comments related to any ethical issues that arise.
Scenario 1
Susan, the owner and president of Frosty Dairy Treats (Frosty’s), wanted to sell the business to Delilah’s Frozen Delights, Inc. (Delilah’s). To provide a basis for the transaction, Susan retained Franklin, an accountant, to perform an audit of Frosty Dairy Treats. Franklin knew that Delilah would use the audit report in making the purchase of Frosty’s. Franklin’s audit report showed Frosty’s to be profitable. Delilah relied on this report in agreeing to purchase Frosty’s and agreeing to the terms of the purchase. Sometime later, it was discovered that the accountant had made a number of mistakes and that the business that was sold was actually insolvent. Delilah sued Franklin and his firm for damages. The suit claimed that Franklin had negligently misrepresented the facts.
Provide legal arguments for each side and determine a winner.
Does it make any difference whether Frosty’s or Delilah’s was a publicly traded company?
Scenario 2
Magic Suzy, an expert balloon artist, rented two helium tanks from Party Products. Magic Suzy had a booth at the city fair that was in town from Friday until Sunday night. She was going to give out helium-filled balloons, as well as the little animals she made from twisting the balloons. The rental contract required Suzy to return the used tanks by Monday. She left the tanks inside her booth at the fairgrounds on Sunday evening after the fair closed. Suzy planned to come back early Monday to clean and pick up the tanks.
Oscar, aged 15, attended the fair with some friends. After the fair was closed, they jumped over the fence and discovered the tanks. The tanks carried printed warnings stating:
HELIUM GAS— CAUTION! CAN CAUSE RAPID SUFFOCATION IF INHALED. KEEP AWAY FROM HEAT, FLAME OR SPARKS.
Despite these warnings, Oscar opened the valve and inhaled some helium from one of the tanks, collapsed, and died. Oscar’s father sued Magic Suzy and Party Products for product liability and negligence.
Will Oscar’s father win his suit? Explain why or why not.
Does the rental contract between Magic Suzy and Party Products influence the case in any way? If yes, how? If not, explain why.
Discussion Question Part II
In two to three paragraphs, provide the following information about the business you created in Week 1.
- Based on the type of product your business will offer, discuss potential product liability issues and how your company can avoid these potential risks.
- Explain your plans to handle sales contracts and warranties.
- What are the advantages and disadvantages to contracts:
- including FOB Shipment terms
- including FOB Destination terms
- Will your contracts include FOB Shipment or FOB Destination terms?
- If you hire an accountant to audit your business, what standards should you expect from the accounting firm?
ANSWER:
When i have to select one of the top three principles which forms basis of any given business organization and to build a business from which i will be able to sell a minimum of one substantial product or provide any service to customers , i would be selecting individual proprietorship. Individual proprietorship or Sole ownership is a business in which one person owns the complete business. More over am a kind of person who likes to see my money getting created in front of own eyes .Initially i would be sole worker in my firm and based on my growth i would like to add more employees whenever needed. I would like to Homemade products which can be made me people itself. Products such as homemade chocolates , Jute bags , Woodwork are desirable . I will also keep my option of resale as open whenever am unable to find whole sale options. I would like to Name my Company as ” Opulent Services “. The primary office will be located in Mississippi Coast since i feel it is great place for handmade articles .As mentioned earlier i would like to be the sole owner of my company using which i will be able to make a living for myself by reselling and crafting .Individual proprietorship has several advantages such as zero organizational fees , Lesser taxes , Full control of Administrative decisions. Apart from that other advantages in Mississippi has is lack of Legal requirements when it comes to formation of Individual proprietorship .other than that i will be requiring a first name ,employer identification number and zoning clearance certificates .Only disadvantage which i feel is there will be immense personal liability with resource limitations.
If i hire aaccountant ,i would like the Accounting firm to follow and adhere to standards such as FASB , GASB and AICPA.
References:
1. Twomey, D. (2013). Anderson’s Business Law and the Legal Environment, Comprehensive Volume (22nd ed). Cengage Learning. Retrieved from http://digitalbookshelf.south.edu/books/9781285696683/id/L41-2-2