Salem Corporation purchased a one-year insurance policy in January 2016 for $51000. The insurance policy is in effect from April 2016 through March 2017. If the company neglects to make the proper year-end adjustment for the expired insurance

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DExplanation:The insurance policy costs $51,000 for 12 months, which means it costs $4,250 per month ($51,000 / 12 months). From January to December 2016, 9 months of the policy have been used (April to December), so $38,250 of the insurance ($4,250 x 9 months) should be recognized as an expense for 2016. If Salem Corporation neglects to make the proper year-end adjustment, it means they haven't recognized this expense. Therefore, their net income will be overstated because they haven't expensed the insurance that has expired. Their assets will also be overstated because the prepaid insurance asset hasn't been reduced by the expired portion. This makes option B correct.For the period from January to March 2017, the insurance has not yet expired, so there's no need to adjust for this period at the end of 2016. Therefore, any adjustments or considerations for understatements or overstatements related to this period are not relevant to the question as it pertains to the year-end adjustment for 2016.

Salem Corporation Purchased a One-Year Insurance Policy in January 2016