During 2024, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:

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, 2024, 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?

Transcribed Image Text:

2022 2023 understated by overstated by $120,000 150,000