Tack reported a Retained Earnings balance of $150,000 at Dec 312007.In June 2008, Tack's internal audit staff discovered 2errors that were made in preparing the 2007 financial statementsthat are considered material:
a. Merchandisecosting $40,000 was mistakenly omitted from the 2007 endinginventory
b. Equipmentpurchased on July 1 2007 for $70,000 was mistakenly charged to arepairs expense account. The equipment should have been capitalized& depreciated using the straight line depreciation, a 10 yearuseful life, and $10,000 salvage value.
1. What amount shouldTack report as a prior period adjustment to beginning RetainedEarnings at Jan 1 2008 (Ignore tax)
2. Give the journalentries that Tack would make in June 2008 to correct the errorsmade in 2007. Assume that depreciation for 2008 is made as a yearend adjusting entry (Ignore tax)