Question 2:At the end of 2013, Castle Consulting did NOT make the adjusting entries indicated below.Indicate the effect of the error on 2013 Net Income, Assets, Liabilities, and Owner's Equity (onDecember 31, 2013). Please specify the dollar effect of the error. Use O for overstate, U forunderstate, and NE for no effect. Assume each error is independent of the others.Error NetIncomeAssets Liabilities Owner'sEquity1. Entry to record interest expense on a shortterm Note Payable. The note as a balanceof 60,000. The annual interest rate of 10%,dated May 1. The interest is payable withthe principal at maturity.2. On July 1st, 2012 the company bought amachine for 240,000 and debited the entireamount to expense. The machine has auseful life of 10 years and no salvage value.The company would normally have usedthe straight line depreciation method. Thecompany did not correct the error in both2012 and 2013.3. Entry to record the expired portion of athreeyear life insurance policy paid for onAugust 1, 2013 for 72,000 and charged to apermanent account.4. Entry to record accrued salaries and wagesearned by employees at fiscal yearend inthe amount of 7,500.

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