A receipt of $15,700 cash from a customer as a payment on account was incorrectly credit to service revenue. Which is the effect of this error on the company's financial statements?

Multiple Choice

• Assets are understated by $31,400 and liabilities are understated by $31,400.

• Assets are overstated by $31,400 and owners' equity is overstated by $31,400.

• Assets are overstated by $15,700 and owners' equity is overstated by $15,700.

• Assets are understated by $15,700 and liabilities are understated by $15,700.

• Assets are understated by $15,700 and owners' equity is understated by $15,700.