QS 3-16 (Static) Determining effects of adjusting entries LO P1, P3 In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record: 1. $3,200 of insurance coverage that had expired (this $3,200 cost had been initially debited to the Prepaid Insurance account). 2. $2,000 of accrued salaries expense. As a result of these two oversights, the financial statements for the reporting period will: Multiple Choice Overstate liabilities by $2,000. Understate expenses by $5,200. Understate net income by $2,000. O Understate assets by $3,200