SMDC and DMCI formed a joint operation to produce hollow blocks an sell them to small contractors. They agreed to share equally on all matters relating to the operation. SMDC contributed 4,000,000 cash while DMCI contributed equipment costing 4,000,000 with accumulated depreciation of 1,000,000. The current fair market value of the equipment at the time of contribution amounted to 4,000,000. 

1. If DMCI carries the equipment at Fair Value, what is the entry in the book of SMDC with respect to the contribution?

2. If DMCI carries the equipment at Fair Value, what is the entry in the book of DMCI with respect to the contribution? 

3. If DMCI carries the equipment at Carrying Value, what is the entry in the book of DMCI with respect to the contribution?

Answer rating: 100% (QA)

SOLUTION 1 If DMCI carries the equipment at fair value the entry in the book of SMDC with respect to the contribution would be as follows Cash 4000000 ... View the full answer