Francom Company engaged in a sale-leaseback transaction as seller/lessee. The leaseback was properly classified as an operating lease and control of the asset transfers to the buyer/lessor. The present value of the lease payments was $30,000. Profit on the transaction was $32,000. Both the sale price and the lease payments are at fair value. The profit on the transaction is: O A. capitalized as part of the carrying amount of the leased asset. Ⓡ O B. deferred and recognized over the lease term. C. deferred and recognized over the useful life of the asset. D. recognized immediately.
Francom Company engaged in a sale-leaseback transaction as seller/lessee. The leaseback was properly classified as an operating lease and control of the asset transfers to the buyer/lessor. The present value of the lease payments was $30,000. Profit on the transaction was $32,000. Both the sale price and the lease payments are at fair value. The profit on the transaction is: O A. capitalized as part of the carrying amount of the leased asset. Ⓡ O B. deferred and recognized over the lease term. C. deferred and recognized over the useful life of the asset. D. recognized immediately.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please answer with reason for all why the option is correct and why the other options are incorrect
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Transcribed Image Text:Francom Company engaged in a sale-leaseback transaction as seller/lessee. The leaseback was properly
classified as an operating lease and control of the asset transfers to the buyer/lessor. The present value of the
lease payments was $30,000. Profit on the transaction was $32,000. Both the sale price and the lease payments
are at fair value. The profit on the transaction is:
O
O
A. capitalized as part of the carrying amount of the leased asset.
B. deferred and recognized over the lease term.
C. deferred and recognized over the useful life of the asset.
D. recognized immediately.
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