I need help and I can't figure this out. My teacher is giving me feedback after feedback and nothing is working. How do I answer this? He says each entry should be in the following format:

• State which financial statements, income or balance sheet, would be affected.
• Then, answer the question what balances would be overstated or understated? Use this format: Example: On the income statement, "________" account is overstated. On the balance sheet, "_______" account is understated. Whatever it applies.
• I already know that #1 is just the balance sheet. But he says that questions #2-4 all affect both the income statement and balance sheets. Please advise.

I'm only supposed to answer what statements are affected and what's being understated or overstated. I don't need to answer with what the corrections should be.

Expand Your Critical Thinking 15-02 b1-b4 (Essay)

In the course of routine checking of all journal entries prior to preparing year-end reports, Betty Eller discovered several strange entries. She recalled that the president's son Joe had come in to help out during an especially busy time and that he had recorded some journal entries. She was relieved that there were only a few of his entries, and even more relieved that he had included rather lengthy explanations. The entries Joe made were:

(1)Work in Process Inventory 25,000

Cash 25,000

(This is for materials put into process. I don't find the record that we paid for these,

so I'm crediting Cash because I know we'll have to pay for them sooner or later.)

(2)Manufacturing Overhead 12,000

Cash 12,000

(This is for bonuses paid to salespeople. I know they're part of overhead, and I can't

find an account called "Non-Factory Overhead" or "Other Overhead" so I'm putting it in

Manufacturing Overhead. I have the check stubs, so I know we paid these.)

(3)Wages Expense 120,000

Cash 120,000

(This is for the factory workers' wages. I have a note that employer payroll taxes are

$18,000. I still think that's part of wages expense and that we'll have to pay it all in

cash sooner or later, so I credited Cash for the wages and the taxes.)

(4)Work in Process Inventory 3,000

Raw Materials Inventory 3,000

(This is for the glue used in the factory. I know we used this to make the products,

even though we didn't use very much on any one of the products. I got it out of

inventory, so I credited an inventory account.)