The manager of Candace Design, Inc., prepared the company's balance sheet as of June 30, 2016, while the 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.

1. Prepare the correct balance sheet and date it properly. Compute total assets, total liabilities, and stockholders' equity.
2. Is Candace Design, Inc., 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 Candace Design, Inc. Balance Sheet June 30, 2016 Assets Liabilities 8,500 Notes receivable 3 Cash 4Equipment 5 Accounts payable 6 Utilities expense 7 Advertising expense 8 Land 9 Salary expense 10 11 Total assets $ 13,000 2,200 1,000 3,800 54,500 74,500 35,600 Interest expense 2,500 Office supplies 1,800 Accounts receivable 300 Note payable 76,000 Total 2,500 Stockholders' Equity Stockholders' equity 52,700 $ 127,200 Total liabilities