Gray Football Co. had a player contract with Vance that is recorded in its books at $3,600,000 on July 1, 2008. Day Football Co. had a player contract with Simms that is recorded in its books at $4,500,000 on July 1, 2008. On this date, Gray traded Vance to Day for Simms and paid a cash difference of $450,000. The fair value of the Simms contract was $5,400,000 on the exchange date. The exchange had no commercial substance. After the exchange, the Simms contract should be recorded in Gray's books at

Question

Quizplus · Accepted Answer

($5,400,000 - $450,000) - $3,600,000 = $1,350,000 (deferred gain)
 $5,400,000 - $1,350,000 = $4,050,000 (Basis).