Andy's Skateboards, Inc. reported a retained earnings balance of $300,000 at December 31, 2008. In June 2009, Andy's internal audit staff discovered two errors that were made in preparing the 2008 financial statements that are considered material:
a. Merchandise costing $50,000 that was on consignment at various consignee locations was mistakenly omitted from the 2008 ending inventory.
b. Equipment purchased in January 2, 2008 for $150,000 was appropriately capitalized and depreciated using straight-line depreciation, a 10-year useful life, and $5,000 salvage value. The capitalized amount included $30,000 for repairs of the equipment which suffered major damage when it was struck by a forklift during installation.
Required:
1. What amount should Andy's Skateboards report as a prior period adjustment to beginning retained earnings at January 1, 2009? (Ignore taxes)
2. Give the journal entries that Andy's Skateboards would make in June 2009 to correct the errors made in 2008. Assume that depreciation for 2009 is made as a year-end adjusting entry. (Ignore taxes)