LAS Owns a Building in North Bay

question 166

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 $2,900,000 (which was the building's fair value on that date) and immediately leases it back for $500,000 per year for 10 years.The historical cost of the building was $9,000,000 and accumulated amortization amounted to $7,000,000.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 $400,000.
• B)a reduction to net income of $500,000.
• C)a reduction to net income of $590,000.
• D)a reduction to net income of $410,000.

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Definitions:

Cytokinesis

Cytoplasmic division; process in which a eukaryotic cell divides in two after mitosis or meiosis.

Sexual Reproduction

The biological process where organisms create offspring by combining genetic material from two different sexes.

Evolutionary Advantage

A trait that increases an organism's likelihood of survival and reproduction in a particular environment.

Haploid

Referring to a cell or nucleus containing a single set of unpaired chromosomes, as seen in gametes (sperm and egg cells) of sexually reproducing organisms.