At the End of 20A, a $2,500 Understatement Was Discovered

Multiple Choice

At the end of 20A, a $2,500 understatement was discovered in the amount of the 20A ending inventory as reflected in the perpetual inventory records. What were the 20A effects of the $2,500 inventory error (before correction) ?

A) Cost of goods sold was understated by $2,500 and pretax profit was understated by $2,500.
B) Cost of goods sold was overstated by $2,500 and pretax profit was overstated by $2,500.
C) Assets (inventory) were understated by $2,500 and pretax profit was overstated by $2,500.
D) Assets (inventory) were understated by $2,500 and pretax profit was understated by $2,500.