n July 2021, Profilo Corporation, which was founded in 2019, discovered that its ending inventories reported on its financial statements were misstated by the following amounts:

2019: understated by $120,000, 2020: overstated by $50,000.

Profilo uses the periodic inventory system and the FIFO cost method. Tax rate is 25%. What is the effect of 2019 error only on retained earnings at January 2021?

	a.	Understated by $120,000
	b.	Overstated by $90,000
	c.	Overstated by $120,000
	d.	Understated by $90,000
	e.	No effect.