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

question 51

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