E 14–16 - Wilkins Food Products, Inc. - Error in amortization schedule ● LO3
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.
Required:
1. Determine which
accounts are incorrect as a result of these errors at January 1, 2011,
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?
