Effects of Errors
Response to the following problem:
The following are several independent errors made by a company:
1. Failure to record a purchase of inventory on credit.
2. Expensing the purchase of a machine.
3. Failure to accrue wages.
4. Failure to record an allowance for uncollectibles.
5. Including collections in advance as revenue.
6. Including payments in advance as expenses.
7. Failure to accrue warranty costs.
8. Discount on a note payable issued for purchase of a machine is ignored.
9. Failure to record depreciation expense on assets purchased during the year.
Required
Indicate the effect of each of the preceding errors on the company's (1) assets, (2) liabilities, (3) owners' equity, and (4) net income in the year in which the error occurs. State whether the error causes an overstatement (+), an understatement (-) (2), or no effect (NE).