(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
C
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