James Taylor Inc. repurchases shares of stock in 2020 and debits an expense account and credits cash. Which of the following is true about the effect of this journal entry on the year-end financial statements?

Select one:

a. Assets - Correct; Liabilities - Correct; Equity - Correct; Net Income - Understated

b. None of these answers is correct

c. Assets - Understated; Liabilities - Correct; Equity - Correct; Net Income - Understated

d. Nothing, this is the correct journal entry.

e. Assets - Correct; Liabilities - Correct; Equity - Understated; Net Income - Understated