At the End of 2016, a $5,000 Understatement Was Discovered

Multiple Choice

At the end of 2016, a $5,000 understatement was discovered in the amount of the 2016 ending inventory as reflected in the inventory records. What were the 2016 effects of the $5,000 inventory error (before correction) ?

A) Assets were understated by $5,000 and pretax income was understated by $5,000.
B) Assets were understated by $5,000 and pretax income was overstated by $5,000.
C) Cost of goods sold was understated by $5,000 and pretax income was understated by $5,000.
D) Cost of goods sold was overstated by $5,000 and pretax income was overstated by $5,000.