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:

Rate Of Interest

The percentage at which interest is paid by a borrower for the use of money they borrow from a lender.

Monthly Payments

Regular amounts paid each month, often in the context of loans, mortgages, or other long-term financial commitments, to reduce a debt or pay for a service.

Terms Of The Loan

The specific conditions agreed upon by the lender and borrower, defining the loan amount, interest rate, repayment schedule, and other obligations.

Future Value

A future date's asset or cash value that matches a predetermined sum's worth in the present.