ACC 304 Course Great Wisdom / tutorialrank.com ACC 304 Course Great Wisdom / tutorialrank.com | Page 83

27. An item of inventory purchased this period for $15.00
has been incorrectly written down to its current replacement
cost of $10.00. It sells during the following period for $30.00,
its normal selling price, with disposal costs of $3.00 and
normal profit of $12.00. Which of the following statements is
not true?

a. The cost of sales of the following year will be understated.

b. The current year's income is understated.