At the beginning of $2020,$ Tanham Company discovered the following errors made in the preceding $2$ years:

$2018$

 

$2019$

Overstatement of ending inventory $$4,900$ $$2,100$

Omission of wages payable $715795$

Omission of allowance for doubtful accounts $1,3051,660$

Prepayment of insurance recorded as expense $515210$

Reported net income was $$25,825$ in $2018$ and $$34,815$ in $2019.$ The allowance for doubtful accounts had a zero balance at the beginning of $2018.$ No accounts were written off during $2018$ or $2019.$ Ignore income taxes.

Required:

$1.$ What is the correct net income for $2018$ and $2019?$

$2.$ Prepare the adjusting journal entry in $2020$ to correct the errors.

Answer rating: 100% (QA)

To solve this problem we need to make the necessary adjustments to the reported net income for 2018 ... View the full answer