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

2019	understated by	$	140,000
2020	overstated by		190,000

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?

2019		2019 effect on 2021
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
Retained earnings		Retained earnings

• chart for req 1A

2020
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold
Revenues
Less: cost of goods sold
Less: other expenses
Net income
Retained earnings

Chart for req 1B

2 is journal entry

3 is either retrospectively or prospectively