Omission of the merchandise on consignment

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1. In 2013, the controller of Sytec Corporation discovered that $42,000 of inventory purchases were incorrectly charged to advertising expense in 2012. In addition, the 2012 year end inventory count failed to include $30,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year end inventory count was correct. The amounts of the errors are deemed to be material.

Required:
1. Determine the effect of the errors on retained earnings at January 1, 2013. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the errors.
3. What other step(s) would be taken in connection with the correction of the errors?

Reference no: EM13882499

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