Exercise $1-16$A $($Algo$)$ Applications of the Sarbanes$-$Oxley Act LO $1-6$

The CFO of the Franklin Microscope Corporation intentionally misclassified a downstream transportation expense in the amount of $$750,500$ as a product cost in an accounting period when the company made $9,500$ microscopes and sold $6,600$ microscopes. Franklin 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.

Note: If there is no effect, select "Not affected" from the dropdown provided. Enter all answers as positive values.