During 2018, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:

2016 ................understated by ..............$120,000

2017 ................overstated by ................ 150,000

WMC uses a periodic inventory system and the FIFO cost method.

Required:

1. Determine the effect of these errors on retained earnings at January 1, 2018, before any adjustments. 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?