1. You are an accountant at a small publishing company. You are reviewing an income statement that has been prepared by one of your peers. The income statement you receive is as follows.

Income Statement

For the Year Ending December 31

Revenues

Books sold

$120,000

Expenses

Salaries

$90,000

Advertising

25,000

Interest

5,000

105,000

Net income

$15,000

a. What error was made in this income statement?

2. One of your peers is working on the owner's statement of equity. He tells you that the owner ended the year with $25,000 in equity, after withdrawing $10,000.

a. Based on this information, how much did the owner invest in the business over the course of the year?