Wages Expense

120,000Cash120,000(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.)

If the entry (2) was not corrected, which financial statements (income statement or balance sheet) would be affected? What balances would be overstated or understated?