Year-End Audit Call: AR Reserves, Debt Restructuring, and Action Items

April 06, 2026 at 01:01 PM|52 min
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Bottom Line

The audit team (Shane) conducted a year-end review call with the client (JD and Lottie) to discuss financial statement details, identify required adjustments, and gather documentation for Silverco, NC&T, and Two-Family entities. The primary focus was on accounts receivable reserves, debt restructuring, and related party transactions.

Key Takeaways

Accounts Receivable Reserves:: The team confirmed a $743k reserve for damage-related AR is considered adequate, but needs to investigate an unusual positive balance in the CARS Plus AR account (1254).

Debt Restructuring:: A significant debt restructuring with First Source resulted in a new $2M zero-interest note (Note B) for NC&T, consolidating unpaid interest and fees from multiple entities.

Related Party Operations:: Silverco pays for employees and other costs of affiliate Versatile Studios, which will require related party disclosure in the financial statements.

Action Items:: Multiple follow-ups are required, including providing loan documents, sublease agreements, and journal entries to correct misapplied customer credits.
Action Items
Investigate and explain the unusual positive balance in the CARS Plus AR account (1254) and provide necessary adjustments. — Speaker B (JD) & Speaker C (Lottie)
Provide all executed documentation for the 2025 debt restructuring with First Source, including the new Note B and updated agreements for NC&T and Two-Family. — Speaker B (JD)
Provide the total amount of payroll and other costs paid by Silverco on behalf of affiliate Versatile Studios for 2025 for related party disclosure. — Speaker B (JD)
Send executed sublease agreements for new subleases entered into in 2026 (subsequent events). — Speaker B (JD)
Provide amortization schedules/payment plans for the NC&T sales tax liability and the principal maturities for the NC&T and Two-Family debt to footnote disclosures. — Speaker B (JD)
Decisions
To treat customer AR credits under $200 (except specific $357 items) as income adjustments, and credits over $200 as legitimate offsets to CARS Plus invoices. — Speaker B (JD)
To have the client (Lottie) prepare and send journal entries to write off misapplied customer credits and clear them from the AR aging. — Speaker A (Shane)
Topics
Accounts Receivable & Reserves Debt Restructuring & Notes Payroll Accruals Related Party Transactions (Versatile Studios) Fixed Asset Adjustments Subsequent Events (Subleases) Sales Tax Liabilities Audit Follow-ups

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