During $2024,$ Lipe and Lipe Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:

$2022$

$2023$

understated by

$$160,000$

overstated by

$230,000$

Lipe and Lipe uses the periodic inventory system and the FIFO cost method.

Required:

$1-$a$.$ Determine the effect of $2022$ errors on retained earnings at January $1,2024,$ before any adjustments. $($Ignore income taxes.$)$

$1-$b$.$ Determine the effect of $2023$ errors on retained earnings at January $1,2024,$ before any adjustments. $($Ignore income taxes.$)$

$2.$ Prepare a journal entry to correct the error in $2024.$

$3.$ Will Lipe and Lipe account for the error $($a$)$ retrospectively or $($b$)$ prospectively?

Complete this question by entering your answers in the tabs below.

Req $1A$

Req $1$

Determine the effect of $2022$ errors on retained earnings at January $1,2024,$ before any adjustments. $($Ignore income taxes.$)$

Note: If the answers is no effect then select $"$No effect" in the dropdown.

$\backslash$table$[[2022,2022$ effect on $2024,,],[$Beginning inventory,,Beginning inventory,$],[$Plus: net purchases,,Plus: net purchases,$],[$Less: ending inventory,Less: ending inventory,,$],[$Cost of goods sold,Cost of goods sold,,$],[$Revenues$,$Revenues,,$],[$Less: cost of goods sold,Less: cost of goods sold,,$],[$Less: other expenses,Less: other expenses,,$],[$Net income,Net income,,$]]$