On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint venture, Okanagan Inc. Shuswap contributed equipment with a book value of $900,000 and a fair value of S2, 100, 000 for a 50% interest in the joint venture. On December 31, Year 8, Okanagan Inc. 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 the equipment will be used for the same purpose by Okanagan. Calculate the gain on the contribution of equipment and prepare the journal entries for Shuswap Inc. to record the events on January 1 and December 31, Year 8, including Shuswap's share of profit.

On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint venture, Okanagan Inc. Shuswap contributed equipment with a book value of $900,000 and a fair value of S2, 100, 000 for a 50% interest in the joint venture. On December 31, Year 8, Okanagan Inc. 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 the equipment will be used for the same purpose by Okanagan. Calculate the gain on the contribution of equipment and prepare the journal entries for Shuswap Inc. to record the events on January 1 and December 31, Year 8, including Shuswap's share of profit.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 6RE: Oz Corporation has the following assets at year-end: Patents (net), 26,000; Land, 50,000; Buildings,...

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On January 1, 20X1 P Co acquired 70% ownership of S Ltd. On the acquisition date all identifiable assets and liabilities had book values equal to fair values. P uses the cost method to record its investment in S. For external reporting purposes consolidated statements are required. However, the purchase did result in the acquisition of goodwill of $55,000. During the past few years, a number of transactions have taken place: Inter-company downstream sales during 20X5 were 120,000. An unrealized profit of 17,000 still remains in the unsold ending inventory. The beginning inventory included an unrealized profit of 11,000 related to last year’s downstream inter-company sales. Inter-company upstream sales during 20X5 were 70,000. An unrealized profit of 8,000 remains in the unsold ending inventory. There were no inter-company upstream sales last year. On January 3, 20X3, P sold equipment to S for 88,000. The equipment had a net book value of $60,000 and a remaining useful life of 10…
On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint venture, Okanagan Inc. Shuswap 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, Okanagan Inc. 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 Shuswap Ltd. owned a similar portion of the same type of equipment both before and after the contribution to the joint venture. Calculate the gain on the contribution of equipment and prepare the journal entries for Shuswap Inc. to record the events on January 1 and December 31, Year 8, including Shuswap's share of profit.
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