In a sale and leaseback situation
A)the lessee immediately recognizes any loss on sale up to the amount of the difference between carrying value and fair value
B)the lessor recognizes all losses on the sale immediately but must defer and amortize all gains
C)if the present value of the lease payments is equal to or less than 90% of the fair value of the property, the lessee recognizes the entire gain or loss on sale immediately
D)all gains and losses are deferred and amortized by the seller

Question

Quizplus · Accepted Answer

In a sale and leaseback situation, the lessee (the original owner who sells the property and then leases it back) must recognize any loss on the sale immediately, but only up to the amount of the difference between the carrying value and the fair value of the asset. This is because the loss reflects the true economic impact of the transaction on the lessee's financial position.

In a Sale and Leaseback Situation