The manager of Image Maker, Inc., prepared the company’s balance sheet as of March 31, 2012, 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 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 Image Maker 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 accountsappear?

Transcribed Image Text:

Image Maker, Inc. Balance Sheet March 31, 2012 Assets Liabilities Cash Equipment Accounts payable Utilities expense Advertising expense Land Salary expense 16,000 2,100 600 2,400 53,000 74,100 10,500Notes receivable 35,000 Interest expense 4,500 Office supplies 2,000 Accounts receivable 900 Note payable 83,000 Total 2,800 Stockholders' Equity Stockholders' equity 64,600 $138,700 Total assets $138,700 Total liabilities