JC Penny borrowed a note from BOA with an interest rate of 3%. What is the effect on the financial statements when a company fails to accrue interest expense at year-end? A. Net income is overstated, and assets are overstated.

B. Expenses are understated, and stockholders' equity is understated.

C. Net income is overstated, and liabilities are overstated.

D. Expenses are understated, and liabilities are understated.