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 2013?
U.S. GAAP income is $100,000 higher.
IFRS income is $100,000 lower.
IFRS income is $50,000 lower.
IFRS income is $80,000 higher.
U.S. GAAP income is $80,000 higher.
Homework Answers
Answer is ------> IFRS income is $ 80000 higher.
Explanation :
Under US GAAP gain under operating lease will be recognized equally to the Period of lease.
Therefore , $ 100000 gain will be equally recognized for the period of 5 years.
Income under US GAAP = $ 100000 / 5 = $ 20000
But under IFRS , gain will be fully recognized in the year it is realized.
Income under IFRS = $ 100000
Difference under US GAAP and IFRS = $ 100000 - $ 20000 = $ 80000 ( INCOME HIGHER IN IFRS )
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A company sells a building to a bank in 2013 at a gain of
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