The retained earnings at the end of last year were wrong, and this does need correcting. we then add on the profit for this year , and the profit this year also needs correcting
The RE b/f from last year are incorrect because they’re overstated by 300000. The profit for this year are also incorrect because they’re understated by 300000. So we reduce retained earnings b/f by 300000 and increase profit for this year by 300000 hence the net effect of adjustment to this year’s closing retained earnings is (-300000+300000=0).
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And about the closing inventory, it's clearly stated in the last line so it won't be changed
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