In making adjusting entries at the end of its accounting period, Gomez Consulting failed to record

$1,600 of insurance coverage that had expired. This $1,600 cost had been initially debited to the Prepaid Insurance account. The company also failed to record accrued salaries expense of $1,000. As a result of these two oversights, the financial statements for the reporting period will [choose one]

(1) understate assets by $1,600; (2) understate expenses by $2,600; (3) understate net income by

$1,000; or (4) overstate liabilities by $1,000. l01