gmat740 wrote: It can mean

1. Fossils of the arm of sloth
2. Sloth.

So this makes the situation confusing.

But IMO it cannot refer to fossils....fossils is plural....and it cannot refer to arm....because arm cannot be mammal...

Please tell what I am missing here.

Fossils of the arm of sloth

Players of the Team

So, we talk about a collection of fossils of the arm.

I hope now it is clear

Agree with D

goelmohit2002 wrote:

gmat740 wrote: It can mean

1. Fossils of the arm of sloth
2. Sloth.

So this makes the situation confusing.

But IMO it cannot refer to fossils....fossils is plural....and it cannot refer to arm....because arm cannot be mammal...

Please tell what I am missing here.

fossil cant be a mammal. only the sloth can. "making it the earliest known mammal"=>it is the earliest known mammal=>"it" is in subjective case.
"fossils of sloth". sloth is in objective case as it is after a preposition "of". "it" cannot refer to sloth in the sentence as is (though it ideally should). "it" refers to fossils which does not make sense as fossils cannot be a mammal.
D clears the confusion by bringing in "sloth" in place of "it"
also A says: the fossils ...made itself the earliest known mammal. illogical

Th e subject of the sentence is the plural fossils,
not sloth, and therefore requires a plural verb. It
therefore does not have a singular antecedent.
To clarify the identifi cation of the oldest known
mammal, the noun the sloth must be explicitly
identifi ed.

Option D cannot be correct because 'found in ' without were/was preceding it, ends up meaning that fossils were found there throughout the year. Also, have been is wrong.

In option C this is singular and so can only refer to a singular noun which happens to be sloth. But, I agree it would have been better if they would have used ' the sloth'. However, Option C is the best option.

Dear Sir/Madam, how is 'found in Puerto Rico in 1981' modifying 'Fossils' and not 'the arm of a sloth' or even 'sloth'?

In such sentences (type X of Y, modifier) how can we judge which noun is getting modified?

Please suggest.