A Company Sells an Office Building That Has Appreciated in Value

question 26

Multiple Choice

A company sells an office building that has appreciated in value and subsequently leases the space.Which of the following scenarios represents an impact that sale-leasebacks may have on corporate financial statements?

• A)Lower total income will be realized in the year of sale because of capital gains tax
• B)Higher taxable income will be realized in the year of sale because of a gain on sale
• C)Earnings per share increases because the mortgage has been paid off
• D)Higher taxable income will be realized because lease payments cannot be deducted

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Definitions:

Digestive System

The digestive system is the group of organs responsible for breaking down food into nutrients, which the body uses for energy, growth, and cell repair.

Scurvy

A disease caused by a deficiency of vitamin C, characterized by swollen bleeding gums, bruising, and weakness.

Vitamin C

An essential nutrient and antioxidant found in fruits and vegetables, important for the repair of tissue and the enzymatic production of certain neurotransmitters.

Skin

The outermost layer of an organism's body that acts as a protective barrier against environmental hazards and pathogens.