Rivendell Corporation uses the accrual method of accounting and has the following assets as of the end of 2018. Rivendell converted to an S corporation on January 1, 2019.

a. What is Rivendell’s net unrealized built-in gain at the time it converted to an S corporation?

b. Assuming the land was valued at $200,000, what would be Rivendell’s net unrealized gain at the time it converted to an S corporation?

c. Assuming the land was valued at $125,000 but that the inventory was valued at $85,000, what would be Rivendell’s net unrealized gain at the time it converted to an S corporation?

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Asset Cash Adjusted Basis $ 40,000 FMV $ 40,000 Accounts receivable 30,000 30,000 Inventory 130,000 60,000 Land 100,000 125,000 Totals $300,000 $255,000