(A) Previous year‘s profit is overstated and current year‘s profit is also overstated. (X)
(B) Previous year‘s profit is understated and current year‘s profit is overstated. (X)
(C) Previous year‘s profit is overstated and current year‘s profit is understated. ()
(D) There will be no impact on the profit of either the previous year or the current year. (X)
Answers: Previous year‘s profit is overstated and current year‘s profit is understated.