1. During 2016, the company received $850 cash advance from a customer for merchandise to be manufactured and shipped in 2017. The $850 was credited to sales revenue. No entry was recorded for the cost of merchandise. (looking for sales revenue overstated)

2. Hales borrowed $25,000 from a local bank on October 1, 2016. Principal and interest at 12% will be paid on September 30, 2017. No accrual was recorded for interest. (looking for interest expense understated)