At the end of the current year, a company overstated prepaid insurance by $72,000 and understated supplies expense by $103,000. Its effective tax rate is 35%. As a result of this error, net income is:

a. Understated by $113,750.

b. Overstated by $20,150.

c. Overstated by $113,750.

d. Understated by $20,150.