As of January 31, Princess Company owes $500 to Butler Co. for equipment rented during January. If no adjustment is made for this item at January 31, how will Princess's financial statements be affected?

1.Cash will be overstated at January 31.2.Net income for January will be overstated.3.Owners' equity will be understated.4The financial statements will be accurate since the $500 does not have to be paid yet.