Cougar Corp utilizes a periodic inventory system. Below is the information that was reported on Cougar Corp's 2016 and 2017 Income Statements.

During January of 2018, you discover an error in Cougar Corp's inventory records. Specifically, while an ending inventory count in 2016 revealed ending inventory of $50,000, Cougar Corp's accountants mistakenly used $45,000 as their ending inventory in 2016 (beginning inventory in 2017). Assume this is the only mistake made.

2016

2017

Revenues

200,000

200,000

COGS

Beginning Inventory

40,000

45,000

Inventory Purchases

50,000

50,000

COGAS

90,000

95,000

Less: Ending Inventory

(45,000)

(40,000)

COGS

45,000

55,000

Gross Profit

155,000

145,000

Admin & Selling expenses

(40,000)

(35,000)

Net Income

115,000

110,000

You are tasked with making a retrospective adjustment to Cougar Corp's financial statements. Therefore, you must determine what net income should have been in 2016 and 2017 if no mistake was made.

If no mistake was made, Cougar Corp's net income for 2016 would have been ________________ and net income for 2017 would have been __________________.

Once Cougar Corp's financial statements have been retrospectively adjusted to reflect the correct net income for 2016 and 2017, would Cougar Corp have to make an adjustment to the beginning balance of retained earnings for 2018?

Circle: Yes or No

Why or why not? Briefly explain.