Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:
A. Overstated by $31,000.
B. Overstated by $5,000.
C. Understated by $31,000.
D. Understated by $48,000.
Answer: C. Understated by $31,000.
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