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Can you send the solution to LO 3,4 P1-63A. Questions #1-3 page 46 of Financial accounting twelfth edition isbn 978-0-13-4725898-7

onjectives 3, 4: Apply the accounting equation; evaluate business operations; construct a bala nce sheet) The manager of City News, Inc., prepared the com- pany's balance sheet as of May 31, 2018, while the company's a sheet contains numerous errors. In particular, the manager knew that the balance sheet should holders' equity amount needed to achieve this balance. balance, so she plugged in the stock The stockholders' equity amo unt is not correct. All other amounts are accurate. A1 City News, Inc. Balance Sheet May 31, 2018 2 3 Cash 4 Equipment Assets Liabilities 10,000 Notes receivable 35,600 I interest expense 6,500 Office supplies 1,400 Accounts receivable $ 15,800 2,100 700 2,600 50,000 71,200 s Accounts payable 6 Utilities expense 7 Advertising expense 8 Land 400 Note payable 81,000 Total 3,000 Salary expense Stockholders Equity Stockholders' equity 10 11 Total assets 12 66,700 S137,900 137,900 Total liabilities Requirements 1. Prepare the correct balance sheet and date it properly. Compute total assets, total liabilities, and stockholders' equity sheet reports? Give the reason for your answer. balance sheet. State why you excluded them from the correct balance sheet you prepared 2. Is City News actually in better (or worse) financial position than the erroneous balance 3. Identify the accounts listed on the incorrect balance sheet that should not be reported on the for Requirement 1. On which financial statement should these accounts appear?

Answer 1

Answer 1:

Corrected balance sheet is as given below:

Total assets = Cash + Accounts receivable + Notes receivable + Office supplies + Land + Equipment

= $10,000 + $2,600 + $15,800 + $700 + $81,000 + $35,600 = $145,700

Total Liabilities = Accounts payable + Notes payable = $6,500 + $50,000 = $56,500

Stockholders' Equity = Total assets - Total Liabilities = $145,700 - $56,500 = $89,200

Answer 2:

City News is actually in better financial position than the erroneous balance sheet.

Total assets are at higher amount than what was shown in erroneous balance sheet.

Total liabilities are lower than what was shown in erroneous balance sheet.

Stockholders' equity is higher than what was shown in erroneous balance sheet.

As such actual balance sheet shows better capital structure (lower debt ratio) than what was shown in erroneous balance sheet.

Answer 3:

The following accounts listed in the erroneous balance sheet should not be reported on the balance sheet.

Utilities expense

Advertising expense

Salaries expense

Interest expense

These accounts are excluded since they are expense accounts. These accounts are neither assets nor liabilities or equity and hence cannot be part of balance sheet.

These accounts are expense accounts and should appear in Income Statement.