A "Pop-Up" Store Wants to Use Vacated Space at a Shopping

question 106

Multiple Choice

A "pop-up" store wants to use vacated space at a shopping centre to sell seasonal merchandise during the months of October,November and December.The rent is $10,000 per month,but the centre's owners are requiring a payment of $100,000 on September 1.If the space is vacated in good condition at the end of December,the owners will return $70,000 to the lessees.How should the $100,000 be financed?

• A)Space is a permanent asset and should be financed with equity or long-term debt.
• B)Because the lessee may rent the same or similar space in future years,they should use long-term debt or equity.
• C)The space is a temporary asset and should be financed with short-term loans.
• D)The space is a temporary asset and should be financed with trade credit.

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Definitions:

Discontinued Use

Refers to the cessation of operations or production of a segment or unit within a business.

Equity Method

An accounting technique used to record an investor’s proportional share of an associate company’s earnings or losses on its financial statements.

Unrecognised Losses

Losses that have occurred but have not been officially recorded in the financial statements.

Controlling Interest

Controlling interest is a situation in which an investor, entity, or group of entities owns enough shares to dictate the company's policies and direction through voting power.