Failure to Make a Necessary Adjusting Entry for Accrued Interest

Multiple Choice

Failure to make a necessary adjusting entry for accrued interest on a note payable would cause which of the following?

A) An understatement of liabilities and shareholders' equity.
B) An overstatement of profit, an understatement of liabilities, and an overstatement of shareholders' equity.
C) Profit to be understated and liabilities to be understated.
D) Profit to be overstated and assets to be understated.