During 2018, Howard Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2016 ending inventory overstated by $100,000; 2017 ending inventory understated by $60,000. Howard uses the periodic inventory system and the FIFO cost method. Determine the effect of these errors on retained earnings at anuary 2018, before any adjustments Retained earnings at January 1, 2018 is understated by $40,000. Retained earnings at January 1, 2018 is understated by $60,000. Retained earnings at January 1, 2018 is overstated by $40,000 Retained earnings at January 1, 2018 is overstated by $60,000