Chapter 1, Problem 1.69BP

LO 3,4

(Learning Objectives 3, 4: Apply the accounting equation; evaluate business operations; construct a balance sheet) The manager of Parker Design, Inc., prepared the company’s balance sheet as of March 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. 1. Prepare the correct balance sheet and date it property. Compute total assets, total liabilities and stockholders’ equity.
2. 2. Is Parker Design, Inc., in better (or worse) financial position than the erroneous balance sheet reports? Give the reason for your answer.
3. 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?