QUESTION 5 (25 minutes, 21 marks) On October 1, Erik Karlson opened a restaurant named Ek's Eatery Lid. After the first mon of operations, Karison is at a crossroads. The October financial statements paint a glowing picture of the business, and Karison has asked you whether he should expand Enk's Eatery To expand the business, Ek Karison wants to be earning net income of $10,000 per month and have total assets of $35.000. Based on the financial information available to her, Karlson believes he is meeting both goals To start the business, she invested $20,000, not the $10,000 amount reported as "Share capital on the balance sheet. The bookkeeper plugged the $10,000 "Share capital amount to the balance sheet to make it come out even. The bookkeeper made other mistakes too Ek shows you the following financial statements that the bookkeeper prepared Erik's Eatery Income Statement For Month Ended October 31, 2017 Revenues: Investments by owner Uneamed banquet sales revenue 20,000 3,000 23,000 Expenses Wages expense Rent expense Dividends Depreciation expense - fixtures 5,000 4,000 3,000 1,000 13,000 10,000 Net Income Enk's Eatery Balance Sheet October 31, 2017 Liabilities Accounts Payable Sales Revenue Accumulated Depreciation - Fixtures Assets Cash Prepaid Rent Insurance expense Food inventory Cost of goods sold Fixtures (tables, chairs, etc.) Short-term Investments 5.000 32.000 6,000 1,000 1,000 3.000 14,000 19,000 4,000 48,000 1,000 38,000 Owner's Equity Share capital 10,000 48,000 Required: 1. Calculate the corrected amount of net income (loss) for the period ended October 31. Month glowing Es Eatery 510.000 per month ther Karlson 2 Calculate the corrected amount of retained earnings for the period ended October 31 red as "Share pital amount istakes 100 3. Prepare in good form, a corrected classified balance sheet as at October 31. Omittitle 4. Calculate Erik's Eatery's current ratio. 5. Recommend whether he should expand his business or not. Explain