Rivendell Corporation uses the accrual method of accounting and has the following assets as of the end of 2021. Rivendell converted to an S corporation on January 1, 2022.

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?

Transcribed Image Text:

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