On January 1, Lessor Company Incorrectly Recorded a 10-Year Operating

On January 1, Lessor Company incorrectly recorded a 10-year operating lease as a capital lease.The lease requires annual payments.As a result of the recording error, Lessor Company's rent revenue and interest revenue will be $\begin{array}{lll}& \text {Rent Revenue}& \text {Interest Revenue}\\\text { I. } & \text { not affected } & \text { not affected } \\\text { II. } & \text { overstated } & \text { understated } \\\text { III. } & \text { understated } & \text { overstated } \\\text { IV. } & \text { underctated } & \text { inderstated }\end{array}$

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