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For each of the following audit findings, indicate the income statement and balance sheet accounts that are affected and whether these accounts are overstated or understated. Provide an adjusting entry to correct the misstatement, if required. Assume a December 31.xear end. a) The allowance for bad debts has a credit balance of $80,000, which excludes an outstanding $40.000 that is over 120 days past due. The customer company is in bankruptcy proceedings. Despite this, the Controller refuses to set up the allowance because the owner is a friend of his. The controller is confident that the bill will be paid, but the audit team believes an allowance must be set up for this account b) A statistical sample of purchasing transactions revealed $4,440 of misclassifications between CGS and SG&A accounts (CGS was overcharged; SG&A were undercharged). Extrapolating this error to all purchasing transactions indicates a suspected error of $87,262. c) As of December 31, the company has recognized $250,000 of revenue on a $750,000 contract to construct a bridge. The construction work has not yet started, but $40,000 of building materials for the job were received and expensed as contract costs. One-off vs. systemic & effect on audit? a Journal entry(ies): One-off vs. systemic & effect on audit? b b Journal entry(ies): One-off vs. systemic & effect on audit? For each of the following audit findings, indicate the income statement and balance sheet accounts that are affected and whether these accounts are overstated or understated. Provide an adjusting entry to correct the misstatement, if required. Assume a December 31.xear end. a) The allowance for bad debts has a credit balance of $80,000, which excludes an outstanding $40.000 that is over 120 days past due. The customer company is in bankruptcy proceedings. Despite this, the Controller refuses to set up the allowance because the owner is a friend of his. The controller is confident that the bill will be paid, but the audit team believes an allowance must be set up for this account b) A statistical sample of purchasing transactions revealed $4,440 of misclassifications between CGS and SG&A accounts (CGS was overcharged; SG&A were undercharged). Extrapolating this error to all purchasing transactions indicates a suspected error of $87,262. c) As of December 31, the company has recognized $250,000 of revenue on a $750,000 contract to construct a bridge. The construction work has not yet started, but $40,000 of building materials for the job were received and expensed as contract costs. One-off vs. systemic & effect on audit? a Journal entry(ies): One-off vs. systemic & effect on audit? b b Journal entry(ies): One-off vs. systemic & effect on audit

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