8. What is the effect on the financial statements when a company fails to adjust the prepaid insurance expense account at year-end for insurance coverage that has been used? A. Net income is overstated and stockholders' equity is understated. B. Expenses are understated and stockholders' equity is understated. C. Expenses are understated and net income is understated. D. Net income is overstated and assets are overstated. 9. Which of the following statements is correct when inventory unit costs are decreasing? A. FIFO's cost of goods sold will be the largest among the inventory costing methods. B. LIFO's income tax will be the lowest among the inventory costing methods. C. Ending inventory using the FIFO cost method will be higher than the ending inventory when the LIFO method is used. D. Cost of goods sold using the weighted average cost method will be less than cost of goods sold when the LIFO method is used. 10. Which of the following accounts is a deferred expense? A. Unearned Revenue B. Prepaid rent C. Account Receivables D. Wage payables