LAS Owns a Building in North Bay

question 162

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 does not qualify 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 $495,000.
• B)a reduction to net income of $490,000.
• C)a reduction to net income of $505,000.
• D)a reduction to net income of $510,000.

Identify the effects of changes in market conditions (e.g., supply and demand elasticity, market supply shifts) on monopsony outcomes.

Examine regulatory effects and antitrust laws on monopolies and their impact on pricing and competition.

Analyze the dynamics of monopoly pricing, including demand elasticity and marginal cost considerations.

Assess the impact of external factors (e.g., taxes, market entry) on monopoly and monopsony pricing strategies.

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Definitions:

Normal Capacity

The average level of operational output that a company can sustain with its current resources, under normal conditions over a certain period.

Production

The process of creating, manufacturing, or enhancing products or services, often involving both labor and machinery.

Machine Hour

A unit of measure indicating the time a machine is operated, used to allocate manufacturing overhead based on machine time.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead allocated to production, based on changes in the volume of goods produced.