After you have been out of college for a year, you have $5,000 to invest. A friend has started My Dream Inc., and she asks you to invest in her company. You obtain My Dream Inc.'s financial statements, which are summarized at the end of the first year as follows:

My Dream Inc.

Income Statement

For the Year Ended December 31, 2017

Revenues ...................................................................... $80,000

Expenses ........................................................................ 60,000

Net income .................................................................... $ 20,000

Visits with your friend turn up the following facts:
a. The company owes an additional $10,000 for TV ads that was incurred in December but not recorded in the books.
b. Software costs of $20,000 were recorded as assets. These costs should have been expensed.
My Dream paid cash for these expenses and recorded the cash payment correctly.
c. Revenues and receivables of $10,000 were overlooked and omitted.
Requirements
1. Prepare corrected financial statements.
2. Use your corrected statements to evaluate My Dream's results of operations and financial position.
3. Will you invest in My Dream? Give your reason.

Transcribed Image Text:

My Dream Inc. Balance Sheet As at December 31, 2017 $13,000 iabiliies 2 Cash 3 Other assets 4 Total assets 67,000 ily $ 80,000Total liabilities and equity $35,000 5,000 80,000