Using the notation O$/$S $($overstated$),$ U$/$S $($understated$),$ and NO $($no effect$),$ indicate

the effects $($direction and amount$)$ on assets, liabilities, and shareholders$$ equity for each of the

following independent errors or omissions. To illustrate, the first question has been answered

for you.

$1.$ A firm acquires a building costing $$80,000$ by issuing $$80,000$ worth of stock. The firm$$s

accountant forgot to record the transaction for this acquisition.

Assets $=$ Liabilities $+$ Shareholders$$ Equity

U$/$S $$80,000$ NO U$/$S $$80,000$

$2.$ A firm returns defective merchandise it purchased on account for $$5,000$ to the supplier for

full credit. The firm had not yet paid for these items. The firm$$s accountant forgot to record the

transaction for this return.

Assets $=$ Liabilities $+$ Shareholders$$ Equity

$3.$ A firm paid the monthly phone bill of $$2,000$ in cash. The firm$$s accountant forgot to record

the transaction.

Assets $=$ Liabilities $+$ Shareholders$$ Equity

$4.$ A firm purchased inventory of $$10,000$ with cash. The accountant accidently recorded the

transaction as if the firm bought the inventory on account.

Assets $=$ Liabilities $+$ Shareholders$$ Equity