The company in the following question has made errors in accounting for the given transaction. State how these errors affected the financial statements.Your response should include both the direction of the effect (understatement / overstatement) and the amount of the effect for assets, liabilities, and shareholders' equity. If your response is "No Effect", please choose this option - no partial credit will be given for blank responses even if you "meant" no effect. (Hint: Think about what the correct way (or amounts) of accounting for the transaction would be, and compare it to what the company in the question actually did).

On January 1, 2020, Illini Chemicals spent $1,000,000 cash for a new chemical compound development. Illini Chemicals capitalized these R&D costs. Illini Chemicals also recorded an amortization expense in 2020 fiscal year for these R&D costs, estimating that one fifth of the benefits from the R&D costs were consumed during 2020.

Assets = Liabilities + Shareholders' Equity Overstated by Overstated by Overstated by Understated by Understated by Understated by No Effect No Effect No Effect