To be honest, Melody, your answer is half right, and here's why:
The distortion of the large square and 7 small squares happened at the top, not at the bottom.
In the Figure 2, parts 2 and 3 have pushed part 1 upward, and the large square became the rectangle;
7 small squares in the top 2 rows became distorted by taking in that missing small square.
As a result, they also became the rectangels.
Please, take a look at my not-so-fancy post, Figure 2, and I'm sure you'll understand my points.