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Make a journal entry to correct the error

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Reference no: EM132814625

Question - 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. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)

2. Make a journal entry to correct the error in 2021.

3. Will WMC account for the error (a) retrospectively or (b) prospectively?

Reference no: EM132814625

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