Issues Identified in the External Audit

The external auditor identified the following issues in Rocky Mountain Bicycle Manufacturing$$s financial statements:

$$ The auditor identified expenses in the fixed assets category related to the annual trade show that were improperly recorded as a fixed asset and depreciated. The auditor noted the trade show expense was recorded with a cost of $$500,000.$ The asset was assigned to the tooling asset category with a useful life of three years. The asset was placed in$-$service five years ago using the straight$-$line depreciation method and currently has no residual or book value.

$$ The auditor identified that the company expenses, or incurs, warranty repairs and replacements in the period in which the customer requests service. The auditor stated that the company is not compliant with ASC $450-20-05.$ The basis for the auditor$$s statement is that Rocky Mountain Bicycle Manufacturing provides a $10-$year comprehensive warranty, and the cost has been calculated at $2\mathrm{.}5\%$ of sales. The audit firm recommends that a retroactive warranty loss contingency be taken of $$1\mathrm{.}5$ million and future provisions of $2\mathrm{.}5\%$ of sales.

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what is the impact of these errors