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 (on December 31, 2013). Please specify the dollar effect of the error. Use O for overstate, U for understate, and NE for no effect. Assume each error is independent of the others. Error Net Income Assets Liabilities Owner's Equity1. Entry to record interest expense on a short-term Note Payable. The note as a balance of 60,000. The annual interest rate of 10%,dated May
1. The interest is payable with the principal at maturity.
2. On July 1st, 2012 the company bought a machine for 240,000 and debited the entire amount to expense. The machine has a useful life of 10 years and no salvage value.The company would normally have used the straight line depreciation method. The company did not correct the error in both 2012 and 2013.
3. Entry to record the expired portion of a three-year life insurance policy paid for on August 1, 2013 for 72,000 and charged to a permanent account.
4. Entry to record accrued salaries and wages earned by employees at fiscal year-end in the amount of 7,500.