Reporting an Inventory Error

In 2021, AJ Inc. discovered errors in previously reported financial statements that overstated ending inventory on December 31, 2020, by $8,000 and on December 31, 2019, by $12,000. Prepare the correcting entry required on January 1, 2021, ignoring income taxes.

Account Name	Dr.	Cr.
CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A
CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A