If a required prepaid adjustment had not been made, the financial statements would have been affected as follows.

a.

net income overstated, assets overstated, liabilities unaffected, and owner's equity overstated.

b.

net income understated, assets unaffected, liabilities overstated, and owner's equity understated.

c.

net income understated, assets understated, liabilities understated, and owner's equity unaffected.

d.

net income overstated, assets understated, liabilities understated, and owner's equity unaffected