Question: Chime Inc. counted and valued its inventory using the first-in, first-out (FIFO) cost flow assumption at both December 31, 2004 and 2005 and reported these

Chime Inc. counted and valued its inventory using the first-in, first-out (FIFO) cost flow assumption at both December 31, 2004 and 2005 and reported these amounts on its financial statements. While there was no consignment inventory on hand at December 31, 2005, there was at December 31, 2004. If consignment inventory (inventory not belonging to Chime, but stored on its premises), had been inadvertently counted and included in the 2004 inventory valuation, the

A. inventory would have been overstated at December 31, 2005

B .inventory would have been understated at December 31, 2005

C. None of the other alternatives are correct

D. net income would have been understated in 2004

E. net income would have been understated in 2005

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