Question:In preparing its year-end adjusting entries, XYZ Company neglected to adjust prepaid insurance for the amount of insurance expired during Year 1. Which of the following reflects the result of this error? 

A Year 1 net income is understated, the balance in retained earnings is understated, and assets are understated. 
B Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are correctly stated. 
C Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are overstated. 
D None of these 

+ Answer
B 

+ Explanation
Answer not sure

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Md. Habib Ullah

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