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

2019	understated by	$	140,000
2020	overstated by		190,000

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?

2019 2019 effect on 2021 Beginning inventory Beginning inventory Plus: net purchases Plus: net purchases Less: ending inventory Less: ending inventory Cost of goods sold Cost of goods sold Revenues Revenues Less: cost of goods sold Less: cost of goods sold Less: other expenses Less: other expenses Net income Net income Retained earnings Retained earnings

• chart for req 1A

	2020 Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold Revenues Less: cost of goods sold Less: other expenses Net income Retained earnings

Chart for req 1B

2 is journal entry

3 is either retrospectively or prospectively