Answer:
Net profit or net income is overstated by $38000 and option B is the correct answer.
Explanation:
The adjusting entry to be made for accrued and unpaid wages would have been,
Wages expense 38000 Dr
Wages payable 38000 Cr
This entry would record an increase in expenses of $38000 and an increase in liabilities of $38000. As the entry is omitted, the expenses of $38000 are not recorded thus the expenses in income statement are understated. An understatement of expenses means an overstatement of profit by the same amount.
Thus, net profit or net income is overstated by $38000
