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 cash Other Assets Total Assets SUNRISE LIMITED Assets SUNRISE LIMITED BALANCE SHEET AS AT 31 DECEMBER 2020 R 7000 liabilities 99 000 120 000 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 MAYJUN 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) Question 2 (Accounting and Ethics) (15 marks) Marang Letsatsi is the MD and main shareholder of Marang's Bar & Grill. To expand, the business is applying for a R250 000 bank loan. To get the loan, Marang is considering two options for beefing up the owners' equity of the business: Option1: Issue R100 000 of ordinary shares for cash. A friend has been wanting to invest in the company. This may be the right time to extend the offer Option 2: Transfer R100 000 of Marang 's personal land to the business, and issue ordinary shares to Marang. Then after obtaining the loan Marang can transfer the land back to himself and zero out the ordinary shares Required Use the ethical decision-making model to answer the following questions: 1. What is the ethical issue (1) 2. Who are the stakeholders? (4) what are the possible consequences to each? (2) 3. Analyze the alternatives from the following standpoints a) economic, b) legal, and c) ethical (6) 4. What would you do? How would you justify your decision? How would your decision make you feel afterwards? (2)