Final answer:
The correct answer is that the net income will be overstated option (a) because the unpaid salaries have not been recorded as an expense, which would have reduced the net income.
Step-by-step explanation:
If the accountant for Jones Auto Repair fails to make an adjusting entry to record $5,000 of unpaid salaries for the last 2 weeks of the year, the net income will be overstated. This is because the expenses have not been accounted for, which would have reduced the net income if recognized.
Since the salaries are an obligation that the company owes and they have not been paid yet, this results in an understatement of liabilities and an overestimation of the owner's equity as well.
As a result, the failure to record the unpaid salaries would not affect the total assets immediately, since paying the salaries would decrease both the company's assets (by reducing cash or increasing a payable) and the owner's equity (by reducing retained earnings due to the increase in expenses).