At the end of the current year, a company overstated prepaid insurance by $80,000 and understated supplies expense by $100,000. Its effective tax rate is 40%. As a result of this error, net income is:
A) Overstated by $108,000.
B) Overstated by $12,000.
C) Understated by $108,000.
D) Understated by $12,000.

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At the End of the Current Year, a Company Overstated