Circuit Board Framework (CBF)

Income Statements

For the four years ended December 31, 2018

2018

2017

2016

2015

Net Revenues and Gains Expenses and Losses

$30,250,000

$28,930,000

$27,610,000

$22,990,000

Cost of Sales

16,416,000

13,122,000

10,632,600

9,936,000

Gross Profit

13,834,000

15,808,000

16,977,400

13,054,000

Operating Expenses

3,476,000

3,382,500

3,179,000

2,530,000

Other Expenses

5,027,000

4,362,600

3,460,600

2,435,400

Net Income Before Taxes

5,331,000

8,062,900

10,337,800

8,088,600

Taxes

1,119,510

1,693,209

2,170,938

1,698,606

Net Income After Taxes

$4,211,490

$6,369,691

$8,166,862

$6,389,994

Common Shares Outstanding

3,000,000

3,000,000

3,000,000

3,000,000

Assuming Dash Spencer LLP owed a duty of care to the Booster Bank, did Dash

Spencer, LLP breach that duty of care?

In determining whether breach occurred, make sure to perform the following accounting

analysis:

a.

Recreate the journal entry that Circuit Board Framework (CBF) made when it sold the stock to Easy Exchange. How much gain was recognized on the sale of the stock? How much cash inflow did this transaction create for CBF?

b.

Calculate the present value of the note receivable using a 15% interest rate. Using the present value of the note as the only economic benefit received, recalculate the gain or loss on the transaction.