Trasten Co operates in an emerging market with a fast-growing economy where prices increase frequently.
Which of the following statements are true when using historical cost accounting compared to current value accounting in this type of market？
(1) Capital employed which is calculated using historical costs is understated compared to current value capital employed
(2) Historical cost profits are overstated in comparison to current value profits
(3) Capital employed which is calculated using historical costs is overstated compared to current value capital employed
(4) Historical cost profits are understated in comparison to current value profits

A. 1 and 2
B. 1 and 4
C. 2 and 3
D. 3 and 4