Case 2. (Learning Objectives 4, 5: Correct errors; construct financial statements; evaluate busines
Case 2. (Learning Objectives 4, 5: Correct errors; construct financial statements; evaluate business operations through financial statements)A year out of college, you have $10,000 to invest. A friend has started Grand Prize Unlimited, Inc., and she asks you to invest in her company. You obtain the company’s financial statements, which are summarized at the end of the first year as follows:
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Revenues
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$100,000
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Expenses
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80,000
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Net income
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$ Â 20,000
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Cash
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$Â Â Â 6,000
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Liabilities
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$ Â 60,000
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Other assets
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100,000
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Stockholders’ Equity
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46,000
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Total assets
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$106,000
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Total liabilities and stockholders’  equity
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$106,000
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Visits with your friend turn up the following facts:
a.    Grand Prize Unlimited delivered $140,000 of services to customers during 2012 and collected $100,000 from customers for those services.
b.   Grand Prize recorded a $50,000 cash payment for software as an asset. This cost should have been an expense.
c.    To get the business started, your friend borrowed $10,000 from her parents at the end of 2011. The proceeds of the loan were used to pay salaries for the first month of 2012. Since the loan was from her parents, your friend did not reflect the loan or the salaries in the accounting records.
â–¶ Requirements
1. Prepare corrected financial statements.
2. Use your corrected statements to evaluate Grand Prize Unlimited’s results of operations and financial position. (Challenge)
3.  Will you invest in Grand Prize Unlimited? Give your reason. (Challenge)
Answers
Status NEW
Posted 17 Jul 2017 12:07 AM
My Price 6.00
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Attachments
file 1500251054-Correct errors construct financial statement.docx preview (93 words )
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