During 2011, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:
WMC uses the periodic inventory system and the FIFO cost method.
1. Determine the effect of these errors on retained earnings at January 1, 2011, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?