Several of the financial statement assertions are interrelated.

Required
a. For each of the following, indicate what transaction assertion is violated and describe the affect on related account balance assertions and, where appropriate, on the disclosure assertions.
1. Sales shipped FOB destination are recorded when shipped.
Some of these are in transit at the balance sheet date.
2. An inventory purchase shipped FOB shipping point is in transit at the balance sheet date. The client records the purchase when the shipment is received.
3. Certain repair costs that should be expensed are capitalized.
4. No loss is recorded or disclosed for a pending lawsuit against the client that is material, probable, and can be estimated.
5. Sales shipped FOB shipping point are recorded before the balance sheet date but not shipped until after the balance sheet date.
6. Wages earned but not paid by the balance sheet date are not recorded.
7. Some checks in payment of accounts payable are recorded before the balance sheet date but not mailed until after the balance sheet date.
8. Collections from customers received after the balance sheet date is recorded as of the balance sheet date.
9. A capital lease is improperly accounted for as an operating lease.
10. A $56,000 sale on account near year end was recorded at $65,000.
b. Under what circumstances might the recording of FOB destination sales that are in transit at the balance sheet date be acceptable to the auditor?
c. Do all of the items in part (a) affect net income? Explain.