The CFO of the Vernon Microscope Corporation intentionally misclassified a downstream transportation expense in the amount of $658,000 as a product cost in an accounting period when the company made 9,400 microscopes and sold 6,600 microscopes. Vernon rewards its officers with bonuses that are based on net earnings.

Required a. Indicate whether the elements on the financial statements i.e., assets, liabilities, equity, revenue, expense, and net income) would be overstated or understated as a result of the misclassification of the downstream transportation expense. Determine the amount of the overstatement or understatement for each element. (If there is no effect select "Not affected" from the dropdown provided. Enter all answers as positive values.) Assets Liabilities Retained earnings Revenue Expense Net income