On January 1, Year 10, Company A and Company B formed a new joint venture, Company C.
Question:
On January 1, Year 10, Company A and Company B formed a new joint venture, Company C. Company A contributed equipment with a book value of $900,000 and a fair value of $2,100,000 for a 50% interest in the joint venture. On December 31, Year 8, Company C. reported a net income of $612,000. The equipment transferred has an estimated useful life of 20 years. Ignore taxes.
Assume the transaction does not have commercial substance because Company A owned a similar portion of the same type of equipment both before and after the contribution to the joint venture.
Required:
1. Calculate the gain on the contribution of equipment
2. prepare the journal entries for Company A to record the events on
January 1 and December 31, Year 8, including Shuswap's share of profit.
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell