Ambiguous adjustment for prepaid insurance error

Steps:

• Reported loss is $16,000.
• No entry for bank charges $620 understates expenses; add$620 to loss for $16,620.
• No adjustment for insurance prepaid $480: unclear if initial payment was fully expensed (overstating expenses by$480) or capitalized without amortization (understating expenses by used portion, unknown).
• Cannot compute exact net adjustment without details on insurance transaction and used amount.

Why C is correct:

• Not enough information to confirm any option, as accounting standards require complete transaction data for accurate expense allocation under accrual basis.

Why the others are wrong:

• A assumes both errors reduce loss, ignoring directions.
• B assumes net reduction in loss, reversing typical effects.
• D assumes both errors increase loss, misinterpreting prepaid adjustment.

Final answer: Not enough information.