Problem
Wilkins Food Products, Inc. - Error in amortization schedule.
Wilkins Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2009. In payment for the machine Wilkins 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 Wilkins failed to discover until 2011. The error had caused Wilkins to understate interest expense by $45,000 in 2009 and $40,000 in 2010.
Task:
• Determine which accounts are incorrect as a result of these errors at January 1, 2011, before any adjustments. Explain your answer. (Ignore income taxes.)
• Prepare a journal entry to correct the error.
• What other step(s) would be taken in connection with the error?
The response must include a reference list. One-inch margins, double-space, Using Times New Roman 12 pnt font and APA style of writing and citations.