The manager of City News, Inc., prepared the company’s balance sheet as of May 31, 2018, while the company’s accountant was ill. The balance sheet contains numerous errors. In particular, the manager knew that the balance sheet should balance, so she plugged in the stockholders’ equity amount needed to achieve this balance. The stockholders’ 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 stockholders’ equity.
2. Is City News actually in better (or worse) financial position than the erroneous balance sheet reports? Give the reason for your answer.
3. Identify the accounts listed on the incorrect balance sheet 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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A1 City News, Inc. Balance Sheet May 31, 2018 1 Liabilities Assets 10,000 Notes receivable 35,600 Interest expense 6,500 Office supplies 1,400 Accounts receivable 400 Note payable 81,000 Total 3,000 Stockholders' equity $ 137,900 Total liabilities 3 Cash 4 Equipment 5 Accounts payable 6 Utilities expense 7 Advertising expense 8 Land 9 Salary expense 10 11 Total assets 15,800 2,100 700 2,600 50,000 71,200 Stockholders' Equity 66,700 137,900 12