You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2021, you discover the following errors related to the 2019 and 2020 financial statements: a. Inventory at 12/31/2019 was understated by $7,400. b. Inventory at 12/31/2020 was overstated by $11,800. c. On 12/31/2020, inventory was purchased for $4,400. The company did not record the purchase until the inventory was paid for early in 2021. At that time, the purchase was recorded by a debit to purchases and a credit to cash. The company uses a periodic inventory system. Required: 1. Assuming that the errors were discovered after the 2020 financial statements were issued, analyze the effect of the errors on 2020 and 2019 cost of goods sold, net income, and retained earnings. (Ignore income taxes.) 2. Prepare a journal entry to correct the errors. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 1 Required 2 Assuming that the errors were discovered after the 2020 financial statements were issued, analyze the effect of the errors on 2020 and 2019 cost of goods sold, net income, and retained earnings. (Ignore income taxes.) (Indicate the effect by selecting "O" for Overstated, "U" for Understated and "NE" for No effect. Input all values as positive amounts. Be certain to enter zero wherever needed.) NE 2019 Beginning inventory Plus: Net purchases Less: Ending inventory Cost of goods sold NE 2020 Beginning inventory Plus: Net purchases 7,400 Less: Ending inventory 7,400 Cost of goods sold U U o O U O U Revenues Less: Cost of goods sold Less: Other expenses Net income Revenues 7,400 Less: Cost of goods sold Less: Other expenses Net income NE NE U O Retained earnings LU Retained earnings Required 1 Required 2 Prepare a journal entry to correct the errors. (If no entry is required for a transaction/event, select "No journal entry require first account field.) View transaction list Journal entry worksheet Record journal entry to correct errors. Note: Enter debits before credits. General Journal Debit Credit Event 1