In the Course of routine checking of all Journal Entries prior to preparing year-end reports, Betty discovered several strange entries. She recalled the the Presidents son Joe had come in to help during an especially busy time and that he had recorded some journal entries. She was relieved that there were only a few, and even more relieved that 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 didnt find the record that we paid for these, so Im crediting cash because I know we will 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 theyre part of overhead, and I cant find an account called Non-factory Overhead, so Im putting it in Manufacturing overhead. I have the check stubs, so I know we paid these.)

3. Wage Expenses | 120,000

Cash | 120,000

(This is for factory workers wages. I have a note that employer payroll taxes are $18,000. I still think thats part of wages expense and that well 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 didnt use very much on any of the products. I got it out of inventory, so I credited an inventory account)

1. How should Joe have recorded each of the events?
2. If the entry was not corrected, which financial statement (income or balance sheet) would be affected? Which balances would be overstated or understated?