B is corrent. Per ASC Topic 840, any profit related to a sale-leaseback transaction in which the seller-lessee retains the right to substantially all of the remaining use of the equipment sold shall be deferred and amortized in proportion to the amortization of the leased asset if the transaction is classified as a capital lease. If the transaction is classified as an operating lease (e.g., if the lease begins in the last 25% of the asset’s economic life), the profit shall be deferred and amortized in proportion to the related gross rental charged to expense over the lease term. It is important to note that losses are recognized immediately for either a capital or operating lease.
A is incorrect. Per ASC Topic 840, any profit related to a sale-leaseback transaction in which the seller-lessee retains the right to substantially all of the remaining use of the equipment sold shall be deferred and amortized in proportion to the amortization of the leased asset if the transaction is classified as a capital lease. If the transaction is classified as an operating lease (e.g., if the lease begins in the last 25% of the asset’s economic life), the profit shall be deferred and amortized in proportion to the related gross rental charged to expense over the lease term. It is important to note that losses are recognized immediately for either a capital or operating lease.
A is incorrect. Per ASC Topic 840, any profit related to a sale-leaseback transaction in which the seller-lessee retains the right to substantially all of the remaining use of the equipment sold shall be deferred and amortized in proportion to the amortization of the leased asset if the transaction is classified as a capital lease. If the transaction is classified as an operating lease (e.g., if the lease begins in the last 25% of the asset’s economic life), the profit shall be deferred and amortized in proportion to the related gross rental charged to expense over the lease term. It is important to note that losses are recognized immediately for either a capital or operating lease.
D is incorrect. Per ASC Topic 840, any profit related to a sale-leaseback transaction in which the seller-lessee retains the right to substantially all of the remaining use of the equipment sold shall be deferred and amortized in proportion to the amortization of the leased asset if the transaction is classified as a capital lease. If the transaction is classified as an operating lease (e.g., if the lease begins in the last 25% of the asset’s economic life), the profit shall be deferred and amortized in proportion to the related gross rental charged to expense over the lease term. It is important to note that losses are recognized immediately for either a capital or operating lease.
