Please assist with the following problem. Give at least 100 words.
On December 31, 2008, special insurance costs, incurred but unpaid, were not recorded. If these insurance costs were related to work in process, what is the effect of the omission of accrued liabilities and retained earnings in the December 31, 2008 balance sheet?
Accrued Liabilities Retained Earnings
a. Understated Overstated
b. No effect No effect
c. No effect Overstated
d. Understated No effect