Tack, Inc. reported a Retained earnings balance of \($150,000\) at December 31, 2007. In June 2008, Tack's internal audit staff discovered two errors that were made in preparing the 2007 financial statements that are considered material:

a. Merchandise costing \($40,000\) was mistakenly omitted from the 2007 ending inventory.

b. Equipment purchased on July 1, 2007 for \($70,000\) was mistakenly charged to a repairs expense account. The equipment should have been capitalized and depreciated using straight-line depreciation, a 10-year useful life, and \($10,000\) salvage value.

Required:
1. What amount should Tack report as a prior period adjustment to beginning Retained earnings at January 1, 2008? (Ignore taxes.)
2. Give the journal entries that Tack would make in June 2008 to correct the errors made in 2007. Assume that depreciation for 2008 is made as a year-end adjusting entry. (Ignore taxes.)