The answer to this from the expert is partially wrong. Please advise. My teacher said that the entries must be in this format. I got #1 and #4 correct, but #2 and #3 are incorrect. Here are my answers and here is his feedback.

Entry 1

If the entry was not corrected, the balance sheet would be affected.

On the balance sheet, the cash account is understated.

Entry 2

If the entry was not corrected, both the income statement and balance sheet would be affected.

On the income statement, the sales bonus expense account is understated and costs of good sold is is overstated.

On the balance sheet, the retained earnings account is overstated.

Entry 3

If the entry was not corrected, both the income statement and balance sheet would be affected.

On the income statement, wages expenses is overstated and costs of goods sold is overstated.

On the balance sheet, Cash is understated.

Entry 4

If the entry was not corrected, the balance sheet and income statement would be affected.

On the income statement, the Cost of goods sold is overstated.

On the balance sheet, inventory is understated.

Instructor Feedback

Product costs (materials, labor, overhead) are not separately reported on the financial statements. Product costs (materials, labor, overhead) are accumulated and reported in the Inventory account on the Balance Sheet until sold. Once sold, those costs are moved to Cost of Goods Sold expense on the Income Statement. What accounts reported on the financial statements are impacted when these are incorrect?

2. and 3. You correctly stated for scenario 4 how the product costs impact the I/S but did not for #2 and #3. Please see above on the accounting treatment.