Demski Company pays its employees on the $1$st and $15$th of each month. It is March $31,$ and Demski is preparing $$nancial statements for this quarter. Its employees have earned $$40,000$ since the $15$th of this month and have not yet been paid.

$1.$ How will Demski$$s balance sheet and income statement change to re$$ect the accrual of wages that must be made at March $31?$

$2.$ What balance sheet and income statement accounts would be incorrectly reported if Demski failed to make this accrual $($for each account indicate whether it would be overstated or understated$)?$