Describe effects of change on reported financial statements

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Problem 1: Suppose accounting standards change at the beginning of year 10 and cause leases classified previously as operating leases to be now classified as capital leases. This change is retroactive, i.e., all leases previously classified as operating are now treated as capital leases. Which one of the following best describes the effects of this change on the reported financial statements of year 10? The term "reported" below refers to amounts on the financial statements before any adjustments made by credit analysts.

a. Reported assets at the end of Y10 will increase, reported debt at the end of will increase, reported EBITDA for the period will increase
b. Reported assets at the end of Y10 will increase, reported debt at the end of will increase, reported EBITDA for the period will decrease
c. Reported assets at the end of Y10 will increase, reported debt at the end of will decrease, reported EBITDA for the period will decrease
d. Reported assets at the end of Y10 will decrease, reported debt at the end of will increase, reported EBITDA for the period will increase

Reference no: EM132976738

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