P1-64B. (Learning Objectives 3, 4: Using the accounting equation; preparing a Balance Sheet; making decisions) The manager of News Maker, Inc., prepared the company’s Balance Sheet while the accountant was ill. The Balance Sheet contains numerous errors. In particular, the manager knew that the Balance Sheet should balance, so he plugged in the shareholders’

equity amount needed to achieve this balance. The shareholders’ equity amount is not correct.

All other amounts are accurate.

Requirements 1. Prepare the correct Balance Sheet and date it properly. Compute total assets, total liabilities, and shareholders’ equity.
2. Is News Maker in better (or worse) financial position than the erroneous Balance Sheet reports? Give the reason for your answer.
3. Identify the accounts that should not be reported on the Balance Sheet. State why you excluded them from the correct Balance Sheet you prepared for Requirement 1. On which financial statement should these accounts appear?

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1 2 1 3 Cash News Maker, Inc. Balance Sheet 4 Equipment Assets 5 Accounts payable 6 Utilities expense 7 Advertising expense 8 Land 9 Salary expense 10 11 Total assets 12 Month Ended November 30, 20X6 Liabilities 7,200 Notes receivable 14,600 38,200 Interest expense 5,000 Office supplies 1,200 Accounts receivable 200 Note payable 81,000 Total 55,000 Shareholders' equity 2,000 700 3,200 56,000 95,900 Shareholders' Equity 62,400 138,300 Total liabilities 138,300