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:

Note Cards

Small cards used for recording and organizing information, often used in research and study.

Long-Term Retention

The ability to maintain and recall information over extended periods of time.

Margins

The edge or border of something, especially the blank border on each side of the print on a page.

Research And Development

The investigative activities a business conducts to improve existing products and procedures or to lead to the invention of new products and procedures.