Salem Corporation Purchased a One-Year Insurance Policy in January 2022

Multiple Choice

Salem Corporation purchased a one-year insurance policy in January 2022 for $51,000. The insurance policy is in effect from April 2022 through March 2023. If the company neglects to make the proper year-end adjustment for the expired insurance on December 31, 2022,

A) net income and assets will be understated by $38,250.
B) net income and assets will be overstated by $38,250.
C) net income and assets will be understated by $8,500.
D) net income and assets will be overstated by $8,500.