3 7) XYZ Co. began operations on January 1, 2020. Financial statements for 2020 and 2021 contained the following errors: Dec. 31, 2020 Dec. 31, 2021 Ending inventory $198,000 overstated $219,000 understated Depreciation expense 126,000 overstated No corrections have been made for any of the errors. Ignore income tax considerations. The total effect of the errors on the balance of XYZ's retained earnings at December 31, 2021 is overstated or understated by 8) On January 1, 2021, Pluto Company changed its method of accounting for inventory from LIFO cost method to the FIFO method. This change caused the 2021 beginning inventory to increase by $600,000. The cumulative effect of this accounting change to be reported on the income statement for the year ended December 31, 2021, assuming a 30% tax rate, 9) Cedar Company purchased equipment that cost $100,000 on January 1, 2019. The entire cost was recorded as an expense. The equipment had a ten-year life. Cedar uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Cedar is subject to a 20% tax rate. What is the adjustment to retained earnings at January 1, 2022? 10) On December 31, 2021, ABC, Inc. changed its inventory valuation method to FIFO cost from LIFO cost for financial statement and income tax purposes. The change will result in a $280,000 increase in the beginning inventory at January 1, 2021. Assume a 20% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is 11) Saturn Company purchased a machine on January 1, 2018, for $900,000. At the date of acquisition, the machine had an estimated useful life of ten years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2022, Saturn determined that the machine had an estimated useful life of 15 years from the date of A W