Exercise 20-21 Error in amortization schedule [LO20-6]

Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2014. 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 14%. Lawrence made a conceptual error in preparing the amortization schedule which Wilkins failed to discover until 2016. As a result of the error, Wilkins understated interest expense by $55,000 in 2014 and $50,000 in 2015.

Required: 1. Indicate in the table below which accounts are incorrect as a result of these errors at January 1, 2016 and whether those accounts are understated or overstated. (Ignore income taxes.)

Accounts	2014	2015

2.

Prepare a journal entry to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3.

What other step(s) would be taken in connection with the error? (Select all that apply.)

	No further steps are required
	disclosure note
	prior period adjustment to retained earnings
	affected accounts retrospectively restated in comparative financial statements
	affected accounts prospectively restated only