X Company prepares monthly financial statements. In January, it purchased inventory on account. The accountant recorded the transaction as an increase in Inventories and an increase in Retained Earnings. As a result, which of the following is true regarding the January financial statements? 1.)Accounts Receivable was overstated. 2.)Retained Earnings was understated. 3.)Accounts Payable was understated. 4.)Inventories were understated. 5.)Revenue was understated. 6.)Expenses were understated.