During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: 2019 understated by $120,000 2020 overstated by 150,000 WMC uses a periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. Explain your answer. (Ignore income taxes.)2. Prepare a journal entry to correct the errors.3. What other step(s) would be taken in connection with the correction of the errors?
During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts: 2019 understated by $120,000 2020 overstated by 150,000 WMC uses a periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. Explain your answer. (Ignore income taxes.)2. Prepare a journal entry to correct the errors.3. What other step(s) would be taken in connection with the correction of the errors?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During 2021, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:
2019 understated by $120,000
2020 overstated by 150,000
WMC uses a periodic inventory system and the FIFO cost method.
Required:
1. Determine the effect of these errors on
2. Prepare a
3. What other step(s) would be taken in connection with the correction of the errors?
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