for #1, there is no net income. Is #3 correct?

Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2016. 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 2018. As a result of the error, Wilkins understated interest expense by $45,000 in 2016 and $40,000 in 2017. Required: 1. Indicate in the table below which accounts are incorrect as a result of these errors at January 1, 2018 and whether those accounts are understated or overstated. (Ignore income taxes.) 2. Prepare a journal entry to correct the error. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Indicate in the table below which accounts are incorrect as a result of these errors at January 1, 2018 and whether those accounts are understated or overstated. (Ignore income taxes.) Account Retained earnings Note payable Interest expense 2016 Overstated Understated Overstated 2017 Overstated Understated Overstated Red Required 2 > Required 1 Required 2 Prepare a journal entry to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in th account field.) View transaction list Journal entry worksheet Record correction of error. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Required 1 Required 2 3. What other step(s) would be taken in connection with the error? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) No further steps are required Disclosure note 7 Prior period adjustment to retained earnings Affected accounts retrospectively restated in comparative financial statements 1 Affected accounts prospectively restated only