If a company sells an asset for a profit of $175,000 and immediately leases it back with a capital lease,the gain is recognized
A)immediately as an ordinary gain.
B)immediately as an extraordinary gain.
C)over the life of the lease in proportion to the rental payment.
D)over the life of the lease using the same rate and life used to amortize the leased asset.

Question

Quizplus · Accepted Answer

According to the capital lease rules, the gain on sale is deferred and recognized over the life of the lease using the same rate and life used to amortize the leased asset. Therefore, choice D is the correct answer.

If a Company Sells an Asset for a Profit of $175,000