Answer:
Explanation:
For the year ended 2019;
the retained earnings and inventory were understated by $121,000;
For the year ended 2020;
Opening Inventory Understated $121,000
Closing Inventory Overstated ($151,000)
Net impact by which retained earnings and inventory were overstated ($30,000)
The compound effect on retained earnings as at January 1,2021 was;
Error of 2019-Retained Earnings understated $121,000
Error of 2020-retained earnings overstated ($30,000)
Net impact on retained earnings-understated 91,000
2. Journal Entry-Net impact of 2019 & 2020 errors
Inventory Dr.$91,000
Retained earnings Cr.$91,000
Retained earnings are the actual amount left with the company in the form of profit or earnings after paying off all the expenses, losses, and dividends.
The net impact on the retained earnings of 2021 is $91,000.
1. The effect of the error is shown in the image attached below:
Working Note:
For 2019:
The retained earning was understated by $121,000.
For 2020:
The retained earning was overstated by $30,000; that is computed by the net effect of the understatement of opening inventory of $121,000 and overstatement of closing inventory of $151,000.
2. The journal entry is shown in the image attached below.
To know more about retained earnings, refer to the link:
https://brainly.com/question/25631040
