At the beginning of 2017, Tanham Company discovered the following errors made in the preceding 2 years:

Reported net income was $27,000 in 2015 and $35,000 in 2016. The allowance for doubtful accounts had a zero balance at the beginning of 2015. No accounts were written off during 2015 or 2016. Ignore income taxes.
Required:
1. What is the correct net income for 2015 and 2016?
2. Prepare the adjusting journal entry in 2017 to correct the errors.

Transcribed Image Text:

2015 2016 Overstatement of ending inventory Omission of woges payable Omission of allowance for doubtful accounts $5,000 $2,000 800 ,300 1,700 200 700 Prepayment of insurance recorded as expense 500