In reviewing the accounts of Fries Co, you discovered that a credit of $2,000 to prepaid insurance

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Question:

In reviewing the accounts of Fries Co, you discovered that a credit of $2,000 to prepaid insurance was wrongly credited to accounts receivable, and an $600 prepayment was remitted for a radio advertisement that was not posted. Which of the following statements reflects the effect of the errors?

Multiple Choice

Total assets is overstated by $500 and owner's equity is overstated by $500.
Total assets is understated by $200 and owner's equity is understated by $200.
There is no overstatement or understatement in the total assets and the owner's equity.
Total assets is overstated by $300 and owner's equity is overstated by $300.
Total assets is understated by $1,800 and owner's equity is understated by $1000.