On September 1, 2011, Select Company borrowed $600,000 from a bank and signed a 12%, six-month note payable, with interest on the note due at maturity.

Assume Select made no adjusting entry with respect to this note before preparing the financial statements at December 31, 2011. What is the effect of this error on the financial statements for 2011?

	Total liabilities are overstated.
	Net income is overstated.
	Owners' equity is understated.
	Interest Payable is overstated.