During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2019 understated by $ 142,000 2020 overstated by 194,000 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?

During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2019 understated by $ 142,000 2020 overstated by 194,000 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?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 73APSA: ( Appendix 6B) Inventory Costing Methods Jet Black Products uses a periodic inventory system. For...

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