At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years: 2018 2019 Overstatement of ending inventory $4,895 $1,990 Omission of wages payable 675 760 Omission of allowance for doubtful accounts 1,285 1,635 Prepayment of insurance recorded as expense 490 195 Reported net income was $26,245 in 2018 and $36,405 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019. Ignore income taxes. Required: 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry in 2020 to correct the errors.

At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years: 2018 2019 Overstatement of ending inventory $4,895 $1,990 Omission of wages payable 675 760 Omission of allowance for doubtful accounts 1,285 1,635 Prepayment of insurance recorded as expense 490 195 Reported net income was $26,245 in 2018 and $36,405 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019. Ignore income taxes. Required: 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry in 2020 to correct the errors.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10P: At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2...

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At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years: Reported net income was 27,000 in 2018 and 35,000 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019. Ignore income taxes. Required: 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry in 2020 to correct the errors.
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