During 2021, P Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts:

2019	$	120,000	understated
2020	$	150,000	overstated

P uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, P's retained earnings at January 1, 2021, would be:

Multiple Choice

• $270,000 overstated.

• $150,000 overstated.

• $30,000 overstated.

• Correct.