A company sells a building to a bank in 2013 at a gain of $100,000 and...
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?
IFRS income is $80,000 lower.
IFRS income is $60,000 lower.
U.S. GAAP income is $20,000 higher.
$0.
IFRS income is $80,000 higher.
Homework Answers
Answer is ------------> U..S. GAAP income is $ 20000 higher .
Explanation :
The reason is under U.S. GAAP gain has been equally divided over the period of the lease.
So it will be recognized $ 20000 each year .
However , under IFRS gain has been recognized fully in the year in which it is received.
Hence in next year i.e. 2014 , under U.S. GAAP , gain has to be recognized and Under IFRS no gain has to be recognized.
Difference of Gain Under U.S. GAAP and IFRS = $ 20000 - $ 0 = $ 20000
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A company sells a building to a bank in 2013 at a gain of
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