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	$ 150,000
2023	overstated by	210,000

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.)

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

3. Will Lipe and Lipe account for the error (a) retrospectively or (b) prospectively?

2022		2022 effect on 2024
Beginning inventory	No effect	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

2023
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

Event	General Journal	Debit	Credit
1

Lipe and Lipe account for the