There was no adjustment made for the prepaid insurance. This would: A) Overstate

Question

There was no adjustment made for the prepaid insurance. This would: A) Overstate this period's net income and overstate the next period's income. B) Understate this period's net income and overstate the next period's net income. C) Overstate this period's net income and understate the next period's net income. D) Understate this period's net income and understate the next period's net income. The adjustment for the deferral of a prepaid item was omitted. This would: A) Understate the period's expenses and overstate the period end assets. B) Overstate the period's expenses and overstate the period end assets. C) Understate the periods expenses and understate the period end assets. D) Overstate the period's expenses and understate the period end assets

Explanation / Answer

Overstated. Because, if you leave the insurance in prepaid, it stays on the balance sheet and therefore does NOT make it to the expense account

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