At the beginning of 2008 Tanham Company discovered the following errors made in the preceding two years:

Reported net income was $27,000 in 2006 and $35,000 in 2007. The allowance for doubtful accounts had a zero balance at the beginning of 2006. No accounts were written off during 2006 or 2007. Ignore income taxes.
Required
1. What is the correct net income for 2006 and 2007?
2. Prepare the adjusting journal entry in 2008 to correct theerrors.

Transcribed Image Text:

Overstatement of ending inventory Omission of wages payable Omission of allowance for doubtful accounts Prepayment of insurance recorded as expense 2006 $5,000 700 1,300 500 2007 $2,000 800 1,700 200