Ending Inventory for 20x0 Is Overstated in Error by $4,000

Ending inventory for 20x0 is overstated in error by $4,000 due to a faulty count and costing.The tax rate is 30%.Assume the same accounting methods for both financial reporting and taxes.The error is discovered late in 20x1.Retained earnings at 1/1/x0 was $20,000, and reported earnings (both before correction of error)are: 20x0, $5,000; 20x1, $6,000.
Prepare the comparative retained earnings statements for 20x0 and 20x1.The error overstates 20x0 earnings $4,000 before tax and $2,800 after tax.

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