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During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:

2019	understated by	$	120,000
2020	overstated by		150,000

WMC uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2021. 3. Will WMC account for the error (a) retrospectively or (b) prospectively?

Req 1A

Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) (If the answers is no effect then select "No effect" in the dropdown.)

	2019 2020 Beginning inventory No effect Beginning inventory Plus: net purchases Plus: net purchases Less: ending inventory Understated Less: ending inventory Cost of goods sold Understated Cost of goods sold Revenues Revenues Less: cost of goods sold Overstated Less: cost of goods sold Less: other expenses Less: other expenses Net income Net income Retained earnings Retained earnings

Req 2

Prepare a journal entry to correct the error in 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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