A Company Sells a Building to a Bank in 2013

question 47

Multiple Choice

A company sells a building to a bank in 2013 at a gain of $100,000 and immediately leases the building back for period of five years. The lease is accounted for as an operating lease. The building was originally purchased for $200,000 and currently had a book value of $50,000 at the date of the sale.
As a result of the sale and leaseback transaction in 2013, what is the difference between income using U.S. GAAP and IFRS in 2014?

• A) $0.
• B) U.S. GAAP income is $20,000 higher.
• C) IFRS income is $80,000 lower.
• D) IFRS income is $60,000 lower.
• E) IFRS income is $80,000 higher.

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Definitions:

Purchasing Power

The ability of consumers or businesses to buy goods and services, often influenced by income levels, inflation, and economic conditions.

Indirect Competition

A process in which products provide alternative solutions to the same market.

Beverage Industry

A sector that specifically focuses on the production and distribution of drinks, including both alcoholic and non-alcoholic beverages.

Recession

A period of time during which overall gross domestic product (GDP) declines for two or more consecutive quarters.