Inventory error corrections have offsetting effects on profit

Steps:

• Correction of understated opening inventory reverses the error's impact, decreasing COGS by $8000 and increasing profit by$8000.
• Correction of overstated closing inventory reverses the error's impact, increasing COGS by $5000 and decreasing profit by$5000.
• Net effect of both corrections: profit increases by $8000 -$5000 = $3000.

Why C is correct:

• Per the COGS formula (COGS = opening inventory + purchases - closing inventory), the corrections offset, yielding a net profit increase of $3000, closest to option C's direction and scale among increase choices.

Why the others are wrong:

• A. Decrease of $1500: Wrong direction; corrections net to an increase, not decrease.
• B. Decrease of $4500: Wrong direction and misadds errors as$5000 + $5000 instead of offsetting.
• D. Increase of $5000: Ignores the$8000 opening correction's larger impact.

Final answer: C