In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record:

1. $4,600 of insurance coverage that had expired (this $4,600 cost had been initially debited to the Prepaid Insurance account).
2. 2,700 of accrued salaries expense.

As a result of these two oversights, the financial statements for the reporting period will:

Understate assets by $4,600. Understate expenses by $7,300. O Understate net income by $2,700. Overstate liabilities by $2,700