Madrigal Corp. sold its headquarters building at a gain, and simultaneously leased back the building from the buyer. The lease was reported as a capital (finance) lease. At the time of the sale, the gain should be reported as
A) operating income.
B) other comprehensive income.
C) a separate component of shareholders' equity.
D) a deferred gain.

Question

Quizplus · Accepted Answer

The gain should be deferred and recognized over the term of the lease as a result of the sale-leaseback transaction being classified as a capital (finance) lease.