Nakano Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation.
∙ Lawrence completed construction of the machine on January 1, 2022.
∙ In payment for the machine Nakano 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 Nakano failed to discover until 2024.
∙ The error had caused Nakano to understate interest expense by $45,000 in 2022 and $40,000 in 2023.

Required:
1. Determine which accounts are incorrect as a result of these errors at January 1, 2024, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?