A Company Sells a Building to a Bank in 2011

question 16

Multiple Choice

A company sells a building to a bank in 2011 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, 2012, with regard to the sale and leaseback accounting, what amount would reconcile stockholders' equity from U.S. GAAP to IFRS at December 31, 2012?

• 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:

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for, considered an asset on the balance sheet.

Supplies On Hand

The inventory of materials and goods currently available in a business for use or sale.

Adjustment

A process of altering financial records or accounts to correct any discrepancies or errors.

Supplies Expense

Costs associated with the consumable items that a business uses within its operating activities.