On May 1, 2017, a company purchased a one-year insurance policy for $1,560. The policy was renewed for another year on May 1, 2018, for $1,680. The company recorded both payments as expenses when paid. What is the effect of this on the companys 2018 calendar year net income and year-end assets?

• A : Net income is overstated by $40 and assets are overstated by $560.

• B : Net income is understated by $40 and assets are understated by $560.

• C : Net income is overstated by $560 and assets are understated by $560.

• D : Net income is understated by $40 and assets are overstated by $40.