A Company Sells a Building to a Bank in 2013

question 55

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.
Assume the seller of the building is a U.S. company that is preparing to convert from U.S. GAAP to IFRS. At December 31, 2014, with regard to the sale and leaseback accounting, what amount would reconcile stockholders' equity from U.S. GAAP to IFRS at December 31, 2014?

• A) Increase $40,000.
• B) Decrease $40,000.
• C) Decrease $60,000.
• D) Increase $60,000.
• E) No amount would be necessary for reconciliation.

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Definitions:

Total Product

The aggregate production level of a business within a certain period.

Marginal Products

The incremental output generated when one unit of a certain input is added, with all other conditions being held steady.

Substitute Labor

involves using alternative workforce options, such as temporary or gig workers, in place of regular employees to perform tasks or jobs.

Price of Capital

The cost of using capital assets, reflected in the interest rate or rate of return that investors demand for using their capital.