At August 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted.

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At August 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted. Which items will be incorrectly stated, because of the error, on?
(a) The income statement for August and
(b) The as of August 31? Also indicate whether the items in error will be overstated or understated.

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