Daniel Plc Sells One of Its Properties to a Financing

question 6

Multiple Choice

Daniel Plc sells one of its properties to a financing company with an attached call option,which allows Daniel Plc to reacquire the property at a future date for €400 000.The current market value at the time of the sale is €300 000,but the financing company pays €350 000 for it.It is expected that the market value of the property will exceed €400 000 before the option expires.What is the appropriate treatment of this sale?

• A)Record the revenue and make appropriate note disclosures about the call option and its associated risks.
• B)Set-off the call option and the building-reporting changes in the difference between their current values as revenues or expenses as appropriate.
• C)No entry would be required as the call option is off balance sheet and the building has not effectively been sold.
• D)Record the inflow of cash and a liability.

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Definitions:

Facial

Relating to the face, or to the facial nerve which controls muscles of expression, taste sensation, and more.

Auditory Tube

A tube that connects the middle ear to the back of the nose, helping equalize pressure in the ear; also known as the Eustachian tube.

Semicircular Canals

Three fluid-filled tubes in the inner ear that help maintain balance by sensing rotation of the head.

Cochlea

A spiral-shaped, fluid-filled inner ear structure that is essential for hearing as it transfers sound vibrations to nerve impulses.