LAS Owns a Building in North Bay

question 13

Multiple Choice

LAS owns a building in North Bay.LAS enters into an agreement with BH as follows: LAS sells the building to BH on 1/1/2014 for $1,900,000 (the building's fair value on that date was $1,800,000) and immediately leases it back for $500,000 per year for 10 years.The remaining life of the building is estimated at 20 years.The historical cost of the building was $9,000,000 and accumulated amortization amounted to $7,000,000.Assuming that ASPE applies, and that the lease qualifies as a finance lease, the net effect of this transaction on the statement of comprehensive income in the year of sale would be:

• A)a reduction to net income of $490,000.
• B)a reduction to net income of $510,000.
• C)a reduction to net income of $495,000.
• D)a reduction to net income of $505,000.

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Definitions:

TripAdvisor

An online platform that provides reviews and recommendations for hotels, resorts, inns, vacations, travel packages, travel guides, and more.

Cap-and-Trade Program

An environmental policy tool that sets a limit on emissions and allows companies to buy and sell permits for the right to emit greenhouse gases.