Accounting Multiple Choice Question – 14 July 2022

A business sells its freehold premises to a bank and agrees to repurchase them in five years’ time.

The business continues to use the premises on lease from the bank.

The premises remain in the balance sheet of the business.

What is the reason for this accounting treatment?

Select ONE answer:

1. the asset must be treated in the same way from year to year
2. the commercial reality of the transaction is that the business still owns the asset
3. the cost of the asset must be matched with the periods expected to benefit from its use
4. the income from the sales proceeds must not be anticipated

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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