Problem: As of January 31, Hudson Corporation owes $600 to U-Rent-It for equipment used during January. If no adjustment is made for this item at January 31, how will Hudson's financial statements be affected?
1. Cash will be overstated at January 31.
2. Net income for January will be overstated.
3. Stockholders' equity will be understated.
4. The financial statements will be accurate since the $600 does not have to be paid yet.