During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2019 understated by $134,000 178,000 2020 overstated by 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 $134,000 178,000 2020 overstated by 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 20-19 (Algo) Error correction; inventory error (LO20-6]
During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the
following amounts:
2019 understated by
2020 overstated by
$134,000
178,000
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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0728aa7f-3baf-44d9-a8c2-58e3a77781f3%2F8345345e-a8d2-460e-ae1f-795a5f55b3b2%2Fm67xdb5_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 20-19 (Algo) Error correction; inventory error (LO20-6]
During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the
following amounts:
2019 understated by
2020 overstated by
$134,000
178,000
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?
Transcribed Image Text: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?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Reg 2
Req 3
Determine the effect of 2019 errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)
(If the answers is no effect then select "No effect" in the dropdown.)
2019
2019 effect on 2021
Beginning inventory
Beginning inventory
Plus: net purchases
Plus: net purchases
Less: ending inventory
Less: ending inventory
Cost of goods sold
Cost of goods sold
Revenues
Revenues
Less: cost of goods sold
Less: cost of goods sold
Less: other expenses
Less: other expenses
Net income
Net income
Retained earnings
Retained earnings
Req 1A
Req 1B
>
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