Samuel Anderson Company entered into a 4-year lease agreement on January 1, 2023. Lease payments were set at $155,000 per year (payable at the end of each year).

Samuel Anderson failed to capitalize the lease as an operating lease as required under ASC 842. Instead, it simply recorded the year-end lease payment of $155,000 as rent expense in the years income statement.

What adjustments would have to be made to the 2023 financial statements to comply with GAAP?

Prepare adjustment entries at the end of the year 1? Assume Andersons tax rate was 25% and its discount rate was 7%.

How would these changes affect Andersons ROE and Debt to equity ratios for 2023?