56.A company has the following general journal adjusting entry as at 30 June:

DR Insurance expense $12 000; CR Prepaid insurance $12 000.

What would be the effect on the Balance Sheet if the above general journal adjusting entry was not recorded?

Group of answer choices

1.Understate the Insurance expense, overstate Retained earnings by $12,000 and overstate the current asset Prepaid insurance by $12,000

2.Understate the Insurance expense, understate Retained earnings by $12,000 and understate the current asset Prepaid insurance by $12,000

3.Overstate the Insurance expense, understate Retained earnings by $12,000 and understate the current asset Prepaid insurance by $12,000

4.Overstate the Insurance expense, overstate Retained earnings by $12,000 and overstate the current asset Prepaid insurance by $12,000