value: 2.00 points Exercise 20-19 Error correction; inventory error [LO20-6] During 2016, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2014 understated by $158,000 2015 overstated by 226,000 WMC uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2014 error on retained earnings at January 1, 2016, before any adjustments. (Ignore income taxes.) No effect Understated 2014 Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold 2014 effect on 2015 Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold Understated Overstated No effect Understated Overstated Understated Revenues Less: cost of goods sold Less: other expenses Net income Revenues Less: cost of goods sold Less: other expenses Net income Understated Overstated Retained earnings Understated Retained earnings Corrected 1-b. Determine the effect of 2015 error on retained earnings at January 1, 2016, before any adjustments. (Ignore income taxes.) 2015 No effect Beginning inventory Plus: net purchases Less: ending inventory Cost of goods sold Overstated Understated Understated Revenues Less: cost of goods sold Less: other expenses Net income Overstated Retained earnings Overstated 2. Prepare a journal entry to correct the error made in 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list 1 Record correction of error. Credit