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

2018 2019

Overstatement of ending inventory $4.930 $2,060

Omission of wages payable 700 820

Omission of allowance for doubtful accounts 1.285 1,715

Prepayment of insurance recorded as expense 525 205

Reported net income was $28,225 in 2018 and $36,405 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.

CHART OF ACCOUNTS Tanham Company General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 122 Allowance for Doubtful Accounts EXPENSES 141 Inventory 500 Cost of Goods Sold 152 Prepaid Insurance 511 Insurance Expense 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Wages Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Wages Payable 559 Miscellaneous Expenses LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Wages Payable 559 Miscellaneous Expenses 250 Unearned.Revenue 910 Income Tax Expense 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 1. What is the correct net income for 2018 and 2019? 2. Prepare the adjusting journal entry on January 1, 2020 to correct the errors. General Joumal Instructions