Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2009 and 2010, reported the following amounts and subtotals ($ in millions):

In 2011 the following situations occurred or came to light:

a. Internal auditors discovered that ending inventories reported on the financial statements the two previous years were misstated due to faulty internal controls. The errors were in the following amounts:

2009 inventory Overstated by $12 million

2010 inventory Understated by $10 million

b. A liability was accrued in 2009 for a probable payment of $7 million in connection with a lawsuit ultimately settled in December 2011 for $4 million.

c. A patent costing $18 million at the beginning of 2009, expected to benefit operations for a total of six years, has not been amortized since acquired.

d. Whaley's conveyer equipment was depreciated by the sum-of-the-years'-digits (SYD) basis since it was acquired at the beginning of 2009 at a cost of $30 million. It has an expected useful life of five years and no expected residual value. At the beginning of 2011, Whaley decided to switch to straight-line depreciation.

Required:

For each situation:

1. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2011 related to the situation described. (Ignore tax effects.)

2. Determine the amounts to be reported for each of the five items shown above from the 2009 and 2010 financial statements when those amounts are reported again in the 2009–2011 comparative financial statements.