Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2019. In payment for the machine Wilkins issued a threeyear 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 2021. As a result of the error, Wilkins understated interest expense by $45,000 in 2019 and $40,000 in 2020.Required:1. Determine which accounts are incorrect as a result of these errors at January 1, 2021, before any adjustments. Explain your answer. (Ignore income taxes.)2. Prepare a journal entry to correct the error.3. Will Wilkins account for the error (a) retrospectively or (b) prospectively?
Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2019. In payment for the machine Wilkins issued a threeyear 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 2021. As a result of the error, Wilkins understated interest expense by $45,000 in 2019 and $40,000 in 2020.
Required:
1. Determine which accounts are incorrect as a result of these errors at January 1, 2021, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a
3. Will Wilkins account for the error (a) retrospectively or (b) prospectively?
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