During 2011, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:
WMC uses the periodic inventory system and the FIFO cost method.
Required:
1. Determine the effect of these errors on retained earnings at January 1, 2011, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?