In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record:
1. $3,200 of insurance coverage that had expired (this $3,200 cost had been initially debited to the Prepaid Insurance account).
2. $2,000 of accrued salaries expense.
As a result of these two oversights, the financial statements for the reporting period will [choose one]:

a. Understate assets by $3,200.

b. Understate expenses by $5,200.

c. Understate net income by $2,000.

d. Overstate liabilities by $2,000.