Question

8430000 on July 1, 2020. Ivanhoe Football Co. had a player contract with Kurtz that is recorded in its books at $11150000 on July 1, 2020. On this date, Sheffield traded Watts to Ivanhoe for Kurtz and paid a cash difference of $1115000. The fair value of the Kurtz contract was $12600000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in S

Answer 1

$9,545,000

Step-by-step explanation:

Calculation to determine the amount that Kurtz contract should be recorded in S After the exchange

First step is to calculate the deferred gain

Deferred gain=($12,600,000 – $1,115,000) – 8,430,000

Deferred gain = $3,055,000

Now let calculate the Basis which is the amount that Kurtz contract should be recorded in S After the exchange

Basis=$12600000 – $3,055,000

Basis = $9,545,000

Therefore After the exchange, the Kurtz contract should be recorded in S as $9,545,000