### Inventory Error Analysis for WMC Corporation#### BackgroundIn 2021, WMC Corporation identified errors in its reported ending inventories for the years 2019 and 2020:- **2019**: Understated by $146,000- **2020**: Overstated by $202,000WMC applies the periodic inventory system and utilizes the FIFO (First-In, First-Out) cost method.#### Requirements1. **Determine the Effects on Retained Earnings**: - **1a.** Assess the impact of the 2019 error on retained earnings as of January 1, 2021, before adjustments (exclude income taxes). - **1b.** Evaluate the effect of the 2020 error on retained earnings as of January 1, 2021, before adjustments (exclude income taxes).2. **Journal Entry Preparation**: - Create a journal entry to rectify the error in 2021.3. **Error Accounting Method**: - Decide if WMC should account for the error retrospectively or prospectively.#### Task Instructions- Enter your responses in the designated tabs: Req 1A, Req 1B, Req 2, Req 3. #### Data Input FieldsProvide detailed information for each year:- **2019 and 2020**: - Beginning Inventory - Plus: Net Purchases - Less: Ending Inventory - Cost of Goods Sold (COGS)- **Net Income Calculation**: - Revenues - Less: COGS - Less: Other Expenses - Net Income- **Retained Earnings**: - Report the adjusted retained earnings for 2019 and 2020.### NoteIf the analysis indicates no effect, select "No effect" from the dropdown menu provided.

During 2021, WMC Corporation discovered that its ending Inventories reported on Its financial statements were misstated by the following amounts: 2019 understated by 2828 overstated by $146,000 202,000 WMC uses the periodic Inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 2. Prepare a journal entry to correct the error in 2021. 3. Will WMC account for the error (a) retrospectively or (b) prospectively?

During 2021, WMC Corporation discovered that its ending Inventories reported on Its financial statements were misstated by the following amounts: 2019 understated by 2828 overstated by $146,000 202,000 WMC uses the periodic Inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 1-b. Determine the effect of 2020 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore Income taxes.) 2. Prepare a journal entry to correct the error in 2021. 3. Will WMC account for the error (a) retrospectively or (b) prospectively?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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