During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:

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

WMC uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error in 2021. 3. Will WMC account for the error (a) retrospectively or (b) prospectively?

Req 1A

Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.) (If the answers is no effect then select "No effect" in the dropdown.)

2019		2020
Beginning inventory	No effect	Beginning inventory
Plus: net purchases		Plus: net purchases
Less: ending inventory	Understated	Less: ending inventory
Cost of goods sold	Understated	Cost of goods sold
Revenues		Revenues
Less: cost of goods sold	Overstated	Less: cost of goods sold
Less: other expenses		Less: other expenses
Net income		Net income
Retained earnings		Retained earnings

Req 2

Prepare a journal entry to correct the error in 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)