A Lessee Mistakenly Treated an Operating Lease as a Capital

A lessee mistakenly treated an operating lease as a capital lease.How does this mistake impact the following at the inception of the lease? $$\begin{array} { l l c } & \textbf { Total Assets } & \textbf { Total Liabilities } \\\hline\text { a. } & \text { Understated } & \text { Overstated } \\\text { b. } & \text { Understated } & \text { Understated } \\\text { c. } & \text { Overstated } & \text { Overstated } \\\text { d. } & \text { Overstated } & \text { Understated }\end{array}$$

A) Option A
B) Option B
C) Option C
D) Option D

Correct Answer:

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