A year out of college, you have $10,000 to invest. A friend has started GrandPrize 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:
Grand Prize Unlimited, Inc.
Income Statement
Year Ended Dec. 31, 2010
Revenues................... $100,000
Expenses................... 80,000
Net income................ $ 20,000

Visits with your friend turn up the following facts:
a. Revenues and receivables of $40,000 were overlooked and omitted.
b. Software costs of $50,000 were recorded as assets. These costs should have been expenses. GrandPrize Unlimited paid cash for these expenses and recorded the cash payment correctly.
c. The company owes an additional $10,000 for accounts payable.

Requirements
1. Prepare corrected financial statements.
2. Use your corrected statements to evaluate GrandPrize Unlimited€™s results of operations and financial position. (Challenge)
3. Will you invest in Grand Prize Unlimited? Give your reason.(Challenge)

Transcribed Image Text:

Grand Prize Unlimited, Inc. Balance Sheet Dec. 31, 2010 S 6,000 Liabilities er asst100,000 Equity46,000 ash.... 60,000 Other assets 100,000 Equit.. Total liabilities Total assets$106,000 and equity$106,000