Question 1 (Financial Statements, evaluating an investment opportunity) (15 marks) A year out of university, you have R1

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Question 1 Financial Statements Evaluating An Investment Opportunity 15 Marks A Year Out Of University You Have R1 1 (133.85 KiB) Viewed 14 times

Question 1 (Financial Statements, evaluating an investment opportunity) (15 marks) A year out of university, you have R10 000 to invest. A friend has started a Company, Sunrise Ltd. And 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: INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2020 Revenue Expenses Net income Assets cash Other Assets SUNRISE LIMITED Total Assets SUNRISE LIMITED BALANCE SHEET AS AT 31 DECEMBER 2020 R 7000 99 000 liabilities 120 000 75 000 45 000 Conversation with your friend turns up the following facts: liabilities Equity Share Capital R106 000 Total liabilities and Equity a. Revenue and Receivables of R25000 were overlooked and omitted 56 000 50 000 106 000 6| Page PBA4807 MAY/JUN 2022 PORTFOLIO EXAMINATION b. Advertising costs of R45 000 were recorded as assets. These costs should have been expensed. Sunrise limited paid cash for these expenses and recorded the cash payments correctly c. The company owes an additional R10 000 for accounts payable Required 1. Prepare corrected financial statements (10.5) 2. Use your corrected statements to evaluate Sunrise Limited's results of operations and financial position (2,5) 3. Will you invest in Sunrise Limited? Give reason for your answer (2)