When a Company Sells Property and Then Leases It Back

question 99

Multiple Choice

When a company sells property and then leases it back, any gain on the sale should usually be

• A) recognized in the current year.
• B) recognized as a prior period adjustment.
• C) recognized at the end of the lease.
• D) deferred and recognized as income over the term of the lease.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, often used for reinvestment.

Without Paying

Referring to a situation or action where no monetary exchange is required to obtain a good or service.

WACC

Weighted Average Cost of Capital, a calculation that reflects the average rate of return a company is expected to pay its securities holders, balancing the cost of equity and debt financing.

Cost Of Equity

The return a company is expected to offer to its shareholders to compensate for the risk they undertake by investing in it.