rewrite professional The external auditors identified two significant errors in our financial statements. 1. First, a $500,000 expense for the annual trade show was incorrectly recorded as a fixed asset and depreciated over three years. Rather than fixed assets, the trading show expense is better classified as advertising costs, which, according to ASC 720-35-25-1, should be expensed as incurred or when initially incurred (ASC 720-35-25-1). 2. Second, warranty expenses were recognized when incurred, rather than being estimated and recorded as a liability for the anticipated warranty costs at the time of sale. This does not comply with ASC 450-20-05, which requires companies to estimate and recognize the cost of warranty obligations at the time of sale, rather than when the warranty service is performed (ASC 450-20-05-3)