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Question
Wilkins Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2016. In payment for the machine Wilkins issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 10%. Lawrence made a conceptual error in preparing the amortization schedule, which Wilkins failed to discover until 2018. The error had caused Wilkins to understate interest expense by $45,000 in 2016 and $40,000 in 2017.
Required:
1. which accounts are incorrect as a result of these errors at January 1, 2018, before any adjustments.
2. Required a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?
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