When a company sells property and then leases it back, any gain on the sale should usually be
A) recognized in the current year.
B) recognized as a prior period adjustment.
C) recognized at the end of the lease.
D) deferred and recognized as income over the term of the lease.

Question

Quizplus · Accepted Answer

When a company sells property and then leases it back, any gain on the sale should be deferred and recognized as income over the term of the lease. This is because the sale and leaseback transaction is basically a financing arrangement and the gain on the sale is essentially a borrowing cost. As such, it should be deferred and recognized over the lease term.

When a Company Sells Property and Then Leases It Back