At the end of the current year, a company overstated prepaid insurance by $72,000 and understated supplies expense by $100,000. Its effective tax rate is 40%. As a result of this error, net income is:

Multiple Choice

• Overstated by $16,800.

• Understated by $16,800.

• Understated by $103,200.

• Overstated by $103,200.