For each of the following situations, indicate the effect on assets, net income, and

retained earnings at December $31,2020$ and $2021$ as follows:

$•$ O if the financial statement element is overstated.

$•$ U if the financial statement element is understated.

$•$ NE if there is no effect on the financial statements.

Provide a brief explanation for your choice eg NI U $–$ expenses too high

Note: please present in a table form

a$)$ Depreciation expense on machinery is too high for $2020$ and the $2021$

depreciation expense is correct. $(6$ marks$)$

b$)$ A $3-$year rental agreement was signed on Jan. $12020$ and recorded as a

prepaid asset. No rent expense has been recognized. $(6$ marks$)$

c$)2019$ ending inventory was overstated by $$10,000$; $2020$ inventory

understated by $$8,000$; $2021$ inventory was correct. $(6$ marks$)$

d$)$ A machine with a $15-$year useful life was expensed when purchased in $2020.$

$(6$ marks$)$

e$)$ Did not accrue interest expense on a note payable at Dec $312020.$ Interest

expensed when paid in $2021.$