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Prepare the adjusting journal entry to correct the errors

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Question - At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years:

 

2018

2019

Overstatement of ending inventory

$5,000

$2,000

Omission of wages payable

700

800

Omission of allowance for doubtful accounts

1,300

1,700

Prepayment of insurance recorded as expense

500

200

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.

Reference no: EM133176483

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