During 2013, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:
2011 understated by ........ $120,000
2012 overstated by ........ 150,000
WMC uses a periodic inventory system and the FIFO cost method.
1. Determine the effect of these errors on retained earnings at January 1, 2013, 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?