part 2 after going through the accounting records of doffin corporation in detail, the auditor made a list if observations. you have been asked to review the effect of these observations. for each observation, identify which items on the income statement are overstated or understated. if not affected by the observation, select the "no effect". Operating Expenses Operating Income Sales Cost of Goods Sold Gross Profit Overstated Understated No Effect Purchase of merchandise for resale Cash sale of merchandise Customer retums Yearly estimate for customer returns Freight paid for merchandise purchased FOB shipping point Return of merchandise purchased for resale Freight paid for sales with FOB destination Sale on account Customer payment on account Payment of service fee for processing credit card sales