2. At the end of 2019, a $5,000 understatement was discovered in the 2019 ending inventory as reflected in the inventory records. What were the 2019 effects of the $5,000 inventory error (before correction)? A) Assets were understated by $5,000 and pretax income was understated by $5,000. B) Assets were understated by $5,000 and pretax income was overstated by $5,000. C) Cost of goods sold was understated by $5,000 and pretax income was understated by $5,000 D) Cost of goods sold was overstated by $5,000 and pretax income was overstated by $5,000. 3. Arito, Inc. received a $16,000, 2-month, 9% note dated December 1, 2016 from Rimawa Company. On December 31, 2016, Arito made the necessary adjusting entry to accrue interest income on the note. 120 Arito's entry to record payment of the note on January 31, 2017 was: A) Cash 16,240 Interest income 240 Notes receivable 16,000 B) Cash Interest income Notes receivable 16,000 C) Cash 16,240 Interest receivable 120 Interest income 120 Notes receivable 16,000 D) Cash Interest income Notes receivable 16,000 80