A new accountant who prepared the financial statements for Saltech Company at the end of its first year of operations made several errors.For each of the following items,indicate whether the income statement and balance sheet are affected by the error,and also the amount by which the respective financial statement is affected.(For example,an error might cause revenues and net income on the income statement and retained earnings and accounts receivable and assets on the balance sheet to be overstated by x dollars).Ignore the effects of income taxes.
Items to determine which financial statement is affected,the error amount,and whether the account is overstated or understated:
a.The company had sales for cash of $3,000,000.It also had sales on account of $1,800,000 that had been collected by the end of the year,and sales on account of $200,000 that are expected to be collected early the following year.The accountant reported total sales revenue of $4,800,000.
b.The company had total inventories of $600,000 at the end of the year.Of this amount,inventory reported at $30,000 was obsolete and will have to be scrapped.The balance sheet prepared by the accountant showed total inventories of $600,000.
c.The company has a bank loan for which interest expense during the year of $10,000 will be paid early in January of the next year.The accountant recorded neither the interest expense nor the interest payable.
d.An insurance policy was listed as an asset of $6,000 at the beginning of the year.The entire amount of the policy was for the current year and the policy has expired.The accountant took no action to recognize the expiration of the policy.

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The Answer of A new accountant who prepared the financial statements for Saltech Company at the end of its first year of operations made several errors.For each of the following items,indicate whether the income statement and balance sheet are affected by the error,and also the amount by which the respective financial statement is affected.(For example,an error might cause revenues and net income on the income statement and retained earnings and accounts receivable and assets on the balance sheet to be overstated by x dollars).Ignore the effects of income taxes.
Items to determine which financial statement is affected,the error amount,and whether the account is overstated or understated:
a.The company had sales for cash of $3,000,000.It also had sales on account of $1,800,000 that had been collected by the end of the year,and sales on account of $200,000 that are expected to be collected early the following year.The accountant reported total sales revenue of $4,800,000.
b.The company had total inventories of $600,000 at the end of the year.Of this amount,inventory reported at $30,000 was obsolete and will have to be scrapped.The balance sheet prepared by the accountant showed total inventories of $600,000.
c.The company has a bank loan for which interest expense during the year of $10,000 will be paid early in January of the next year.The accountant recorded neither the interest expense nor the interest payable.
d.An insurance policy was listed as an asset of $6,000 at the beginning of the year.The entire amount of the policy was for the current year and the policy has expired.The accountant took no action to recognize the expiration of the policy.

A New Accountant Who Prepared the Financial Statements for Saltech