If a Corporation Adhering to IFRS Sells Machinery at Fair

question 30

Multiple Choice

If a corporation adhering to IFRS sells machinery at fair value and then leases it back (sale-leaseback) as a finance lease, any gain on the sale should be

• A) recognized in the year of "sale."
• B) recorded as other comprehensive income.
• C) deferred and amortized to income over the term of the lease.
• D) deferred and recognized as income at the end of the lease.

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Definitions:

Credit Sales

Credit sales are transactions where the customer purchases goods or services on credit, agreeing to pay the supplier at a later date.

COGS

Cost of Goods Sold represents the direct costs associated with the production of the goods sold by a company.

Line of Credit

A flexible loan arrangement with a financial institution that allows a borrower to draw funds up to a specified limit at any time.

Compensating Balance

A minimum bank account balance that a borrower must maintain as a condition for some types of loans and lines of credit.