(CMA Adapted, Jun 96 #3) an Item of Inventory Purchased

Multiple Choice

(CMA adapted, Jun 96 #3) An item of inventory purchased in Year 5 for $25.00 has been incorrectly written down to a current replacement cost of $17.50.The item is currently selling in Year 6 for $50.00, its normal selling price.Which one of the following statements is correct?

A) The income for Year 5 is overstated.
B) The cost of sales for Year 6 will be overstated.
C) The income for Year 6 will be overstated.
D) The closing inventory of Year 5 is overstated.
E) none of the above