James & Younger Corporation Purchased a One-Year Insurance Policy in January

Multiple Choice

James & Younger Corporation purchased a one-year insurance policy in January 2013 for $48,000. The insurance policy is in effect from March 2013 through February 2014. If the company neglects to make the proper year-end adjustment for the expired insurance:

A) net income and assets will be understated by $40,000.
B) net income and assets will be overstated by $40,000.
C) net income and assets will be understated by $8,000.
D) net income and assets will be overstated by $8,000.