Financing activities 70000 decrease in cash balance

financing activities ................................ 70,000
Decrease in cash balance ................................. $ (161,000)
Beginning cash balance ................................................. 170,000
Ending cash balance ...................................................... $ 9,000

P4–19 Concluded
Second, based on the above information and the total revenue as reported in the 2005 and 2006
income statements, we can compute the amount of revenue generated by Mayberry Enterprises
from its consulting services.
For 2005
$76,000 – $38,700 = $37,300
For 2006
$89,500 – $40,800 = $48,700
Overall, the revenue from each segment can be broken down as follows.
Display Sales Consulting Service Total
2005 $ 38,700 $37,300 $ 76,000
2006 40,800 48,700 89,500
Total $ 79,500 $ 86,000 $ 165,500
Based on the above, it seems that revenue stream is growing for both product lines. However, the
growth is higher in the consulting service product line.
P4–20
Cash Account .......................................................................... 23,400
Accumulated Depreciation ...................................................... 6,600 a
Equipment ......................................................................... 24,400 b
Gain on Sale of Equipment ............................................... 5,600
a $24,300 + $8,700 – $26,400 = $6,600
b
$84,800 + $37,000 – $97,400 = $24,400
It is true that Badger’s net income has more than tripled from 2005 to 2006. However, this
increase is entirely due to selling the equipment with a book value of $17,800 ($24,400 – $6,600)
for $23,400. This has resulted in a gain of $5,600. Since net income is $5,200, it appears that
Badger has lost money from its regular, recurring operations. I am not sure if we should extend
any loans to Badger, let alone grant the preferential interest rates.
ISSUES FOR DISCUSSION
ID4–1

a. The amount at which MCI would report the SBS system on its balance sheet is the amount
MCI gave up to receive it. Since MCI "paid" $376 million in stock and took on a note for $104
million (with the proceeds going to IBM), MCI would report the SBS system at $428 million
(i.e., $480 million less $52 million of miscellaneous assets received).