Two independent companies, Concord Co. and Ivanhoe Co., are in the home building business. Each...
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Two independent companies, Concord Co. and Ivanhoe Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained:
| Concord's Land | Ivanhoe's Land | |||
| Cost and book value | $546000 | $365000 | ||
| Fair value based upon appraisal | 726000 | 641000 |
The exchange was made, and based on the difference in appraised fair values, Ivanhoe paid $85000 to Concord. The exchange lacked commercial substance. The new land should be recorded on Ivanhoe's books at
$620000.
$365000.
$450000.
$705000.
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