On January 1, Lessee Company Incorrectly Recorded a 10-Year Capital

Multiple Choice

On January 1, Lessee Company incorrectly recorded a 10-year capital lease as an operating lease.The lease requires annual payments.As a result of the recording error, Lessee Company's current ratio and debt to stockholders' equity ratio will be $\begin{array}{lll}&& \text { Debt to Stockholders } \\&\text { Current Ratio } &\text { Equity Ratio }\\\text { I. } & \text { not affected } & \text { not affected } \\\text { II. } & \text { understated } & \text { understated } \\\text { III. } & \text { overstated } & \text { overstated } \\\text { IV. } & \text { nwerctated } & \text { 11verctated }\end{array}$

A) I
B) II
C) III
D) IV