Well, MicroDex was carrying the investment at $5,100,000 and sold it to Greenco for $8,000,000. So they booked a $2,900,000 gain on the transaction, Daniel confidentially replied. Sylvia looked troubled and finally confided to Daniel, Im enrolled in a CPA review course and last week we studied long term receivables and payables. I learned that generally accepted accounting principles (GAAP) require notes receivable due in more than one year to be carried at their present value. Wouldnt that affect the profit you reported? Daniel looked at Sylvia like she was trying to put him on the spot and icily replied, I explained that MicroDex didnt incur any interest on this investment before the sale, so present value calculations arent necessary! And, yes, the income statement we audited is consistent with GAAP.

1) 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.

Assume Peter Nelson LLP breached the duty of care owed to the Bank of Business

Solutions. Were the damages sustained by the Bank of Business Solutions caused by

Peter Nelsons breach of the duty of care? In answering this question do the following:

MicroDex Income Statements For the four years ended December 31, 2004 (in 000s except per share amounts)

	2004	2003	2002	2001
Net Revenues and Gains	$27,500	$26,300	$25,100	$20,900
Cost of Sales	$15,200	$12,150	$9,845	9,200
Operating Expenses	$3,160	$3,075	$2,890	$2,300
Other	$4,570	$3,966	$3,146	$2,214
Taxes	$1,690	$2,671	$3,318	$2,515
Net Income	$2,880	$4,438	$5,901	$4,671
Common Shares Outstanding	3,000	3,000	$3,000	$3,000

2) correct the 2004 income statement?