The draft 20X6 statement of financial position of Vale reported retained earnings of $1,644,900 and net assets of $6,957,300. It was then discovered that several items in opening inventory had been valued at selling price. This resulted in a $300,000 overstatement of opening inventory. The closing inventory had been correctly valued in the draft 20X6 financial statements.
What are the correct figures for retained profit and net assets in the statement of financial position for 20X6?
In the practice section of the study hub this was said as the answer: As the error has been corrected (closing inventory is correct), both retained profit and net assets are correct as stated in the draft statement of financial position.
Tutorial note: Correction of the error would reduce the retained profit brought forward at the beginning of the current year (and therefore the prior year net assets) and increase the profit for the current year. These adjustments cancel each other out.
could you please explain this to me, i would very much appreciate it and thank you for your time