The bookkeeper of the Cask Company, who has maintained its accounting records since the company€™s formation in January 2005, has prepared the unaudited financial statements. In your examination of these statements at the end of 2007, you discover the following items:
1. Sales taxes collected from customers have been included in the sales account. The Sales Tax Expense account is debited when the sales taxes are remitted to the state in the month following the sale. All sales are subject to a 6% sales tax. Total sales (excluding sales tax) for the three years 2005 through 2007 were $200,000, $300,000, and $500,000, respectively.
The Sales Tax Expense account balance for the three years was $10,000, $15,000, and $26,000, respectively.
2. An account payable of $15,000 for merchandise purchased in December 2005 was recorded in January 2006. The merchandise was not included in inventory at December 31, 2005.
3. Merchandise with a cost of $4,000 was included twice in the December 31, 2006 inventory.
4. The company has used the direct write-off method of accounting for bad debts. Accounts written off in the three years 2005 through 2007 were $2,000, $4,500, and $6,500, respectively. The appropriate balances of Allowance for Doubtful Accounts at the end of 2005 through 2007 are $5,000, $6,000, and $8,200, respectively.
5. On January 1, 2006, 12%, 10-year bonds with a face value of $600,000 were issued at 102. The premium was credited to Additional Paid-in Capital. The bonds pay interest on June 30 and December 31, and use of the straight-line amortization method is appropriate.
6. Travel advances to the sales personnel of $18,000 were included as selling expenses for 2006. The travel occurred in 2007.
7. Salaries payable at the end of each year have not been accrued. Appropriate amounts at the end of 2005 through 2007 are $10,000, $11,000, and $7,000, respectively.
8. Installation, freight, and testing costs of $25,000 on a machine purchased in January 2005 were expensed at that time. The machine has a life of five years and a residual value of $10,000.
Required
Analyze the effects of the errors on income for 2005, 2006, and 2007, and the 2007 ending balance sheet (ignore income taxes), according to the followingformat:

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Balance Sheet December 31, 2007 Explanation Income 2005 Income 2006 Income 2007 Amount Debi Credit Debi Credit Debit Credit eb Credit Account