Colt Football Co

question 136

Multiple Choice

Colt Football Co. had a player contract with Watts that is recorded in its books at $5,600,000 on July 1, 2014. Day Football Co. had a player contract with Kurtz that is recorded in its books at $7,000,000 on July 1, 2014. On this date, Colt traded Watts to Day for Kurtz and paid a cash difference of $700,000. The fair value of the Kurtz contract was $8,400,000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in Colt's books at

• A) $6,300,000.
• B) $7,000,000.
• C) $7,700,000.
• D) $8,400,000.

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Definitions:

Face Value

The nominal value printed on a bond, note, or other financial instrument, representing its value at maturity.

Promissory Note

A financial instrument containing a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Dishonored

A term used when a financial instrument, such as a check or bill of exchange, is not paid upon presentation or when agreed terms are not met.

Due Date

The due date is the specified date by which a task, obligation, or payment is required to be completed or submitted.