At the beginning of 2011, Tanham Company discovered the following errors made in the preceding two years:

Reported net income was $27,000 in 2009 and $35,000 in 2010. The allowance for doubtful accounts had a zero balance at the beginning of 2009. No accounts were written off during 2009 or 2010. Ignore income taxes.

Required
1. What is the correct net income for 2009 and 2010?
2. Prepare the adjusting journal entry in 2011 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 2009 $5,000 700 1,300 500 2010 $2,000 800 1,700 200