During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:2019 understated by $120,0002020 overstated by 150,000WMC uses the periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these 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 $120,0002020 overstated by 150,000WMC uses the periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these 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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During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:
2019 understated by $120,000
2020 overstated by 150,000
WMC uses the periodic inventory system and the FIFO cost method.
Required:
1. Determine the effect of these errors on
2. Prepare a
3. Will WMC account for the error (a) retrospectively or (b) prospectively?
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