Question: Tarleton Company discovered ending inventory errors in 2015 and 2016. The 2015 ending inventory was overstated by $205,000 whereas the 2016 ending inventory was understated

Tarleton Company discovered ending inventory errors in 2015 and 2016. The 2015 ending inventory was overstated by $205,000 whereas the 2016 ending inventory was understated by $75,000. Ignoring income tax effects, by what amount should the beginning retained earnings be adjusted on January 1, 2017?

$75,000 debit

$75,000 credit

$130,000 debit

$205,000 credit

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