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

the following amounts:

$2022$ understated by $$124,000$

$2023$ overstated by $158,000$

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.$)$

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

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 $1$B

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.