Final answer:
The gain on a sale in a sale-leaseback transaction is recognized at the time of the sale if the lease is classified as an operating lease, not a finance lease. The correct answer is 'finance lease operating lease no yes'. Therefore correct option is C
Step-by-step explanation:
In a sale-leaseback transaction, the seller-lessee sells an asset and leases it back from the buyer-lessee. The gain on the sale is recognized at the time of the sale-leaseback based on the classification of the lease. In general, the gain is recognized when the lease is an operating lease. However, if the lease is classified as a finance lease, the gain is deferred and recognized over the lease term.
The correct option would be 'finance lease operating lease no yes', meaning the gain should be recognized at the time of the sale-leaseback if the lease is classified as an operating lease (yes) but not if it is a finance lease (no). This is because in an operating lease, the asset is considered 'off-balance sheet,' and the seller-lessee does not retain the risks and rewards of ownership, allowing for immediate gain recognition.