Part III: General Concepts

In each of the following questions, you have transactions that were either "missed" or wrong in the annual financial statements ending on December 31^st.

Indicate the amounts involved and the effects on each of the accounts listed, using the following notation:

overstated (O), understated (U) or no effect (NE)

Each transaction is independent (i.e., the first transaction does not affect the second, etc...).

For each question be sure to show by what amounts the financial statements are wrong before the corrections are made for the forgotten or mistaken transactions.Ignore any tax effects.

Example: A firm neglected to record a payment to a supplier of $10,000. Current Assets (O) 10,000 Long-term assets NE Current Liabilities (O) 10,000 Long-term liabilities NE Capital Stock NE Retained Earnings NE Net Income NE1. On December 31", 2020, Shufe Corp. borrowed $60,000 from a bank. Half of the loan was to be repaid in 2021, and the other half in 2022. This entry was never recorded. The effect of this error in the nancial statements for the scal year end 2020 was: Current Assets Longterm assets Current Liabilities Longterm liabilities Capital Stock Retained Earnings Net Income 2. On December 31\4. Mitch's Pub Inc. neglected to record any entries to recognize the issuance of common stock. The rm sold 100 shares on the open market and received $32 per share. Current Assets Long-term assets Liabilities Capital Stock Income Retained Earnings |:l 5. A firm neglected to record any entries related to the sale of an item to a customer on credit. The item was in inventory at a cost of $5,000 at the time of sale and was sold for $7,500. Current Assets Longterm assets Current Liabilities Longterm liabilities Common Stock Retained Earnings Income