CH5

Q6

In June, your calendar year company pays $1,200 for a 1-year insurance policy that you recorded in Prepaid Insurance. If you do not record an adjusting entry at year end, how will the financial statements be affected? ED Select one: a. Net income: understated, Assets: understated, Liabilities: not affected S Et O b. Net income: overstated, Assets: not affected, Liabilities: understated c. Net income: understated, Assets: not affected, Liabilities: overstated d. Net income: overstated, Assets: overstated, Liabilities: not affected . Check