On May 1, County Ranch paid State Farm $36,000 for a 2 year insurance policy. Prepare the following entries for State Farm:

• May 1 payment assuming it is recorded in a temporary account.
• December 31 adjusting entry
• What is the impact on the financial statements if County Ranch fails to make the December 31 adjusting entry [Over stated, Understated, OK]? (Should be able to cut and paste or abbreviate: Assets, Liabilities, Equity, Revenues, Expenses, Net income)