The Following Information Pertains to Questions

question 36

Multiple Choice

The following information pertains to questions
John Inc and Victor Inc.formed a joint venture on January 1,2010.John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash) for its 70% stake in Jinxtor.Jinxtor reported a net income of $3,000,000 for 2010.John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor.
-Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $240,000 in return for investing its plant and equipment.What would be the impact of this transaction?

• A)This would result in Jinxtor owing John $40,000.
• B)This would result in a return of equity to John in the amount of $30,000.
• C)This would result in a return of equity to John in the amount of $40,000.
• D)This would result in a return of equity to John in the amount of $12,000.

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