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During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were...

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Accounting

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

2019 understated by $ 124,000
2020 overstated by 158,000

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?

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