The table below contains the most likely explanation(s) of the auditor's observations of changes in certain financial statement ratios or amounts from the prior year's ratios or amounts. For each observed change, choose one, two, or three explanations (as indicated) by selecting your choice from the option list provided. Each explanation may be used once, more than once, or not at all.

A.	Items shipped on consignment during the last month of the year were recorded as sales.
B.	A significant number of credit memos for returned merchandise that were issued during the last month of the year were not recorded.
C.	Year-end purchases of inventory were overstated by incorrectly including items received in the first month of the subsequent year.
D.	Year-end purchases of inventory were understated by incorrectly excluding items received before year end.
E.	A larger percentage of sales occurred during the last month of the year, as compared with the prior year.
F.	A smaller percentage of sales occurred during the last month of the year, as compared with the prior year.
G.	The same percentage of sales occurred during the last month of the year, as compared with the prior year.
H.	Sales increased by the same percentage as cost of goods sold, as compared with the prior year.
I.	Sales increased by a greater percentage than cost of goods sold increased, as compared with the prior year.
J.	Sales increased by a lower percentage than cost of goods sold increased, as compared to the prior year.
K.	Interest expense decreased, as compared with the prior year.
L.	The effective income tax rate increased, as compared with the prior year.
M.	The effective income tax rate decreased, as compared with the prior year.
N.	Short-term borrowing was refinanced on a long-term basis at the same interest rate.
O.	Short-term borrowing was refinanced on a long-term basis at lower interest rates.
P.	Short-term borrowing was refinanced on a long-term basis at higher interest rates.

Observed change	Explanation(s)
1. Inventory turnover increased substantially from the prior year.
2. Accounts receivable turnover decreased substantially from the prior year.
3. The allowance for credit losses increased from the prior year, but, as a percentage of accounts receivable, it decreased from the prior year.
4. Noncurrent debt increased from the prior year, but interest expense increased by an amount that was proportionately greater than the increase in noncurrent debt.
5. Operating income increased from the prior year, although the entity was less profitable than in the prior year.
6. The gross margin percentage was unchanged from the prior year, although gross margin increased from the prior year.