On June 30, a company paid $3,600 for insurance premiums for the current year and debited the amount to Prepaid Insurance. At December 31, the bookkeeper forgot to record the amount expired (forget to do the adjusting entry). The omission has the following effect on the financial statements prepared December 31:

Select one:

a. understates net income.

b. overstates assets.

c. overstates both owners equity and assets.

d. overstates owners' equity.