The Following Information Pertains to Questions

question 42

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.
-What is the amount of the amortization of the unrealized gain for 2010 arising from the transfer of John's assets?

• A)$18,000
• B)$42,000
• C)$60,000
• D)Nil

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Definitions:

Customary Pricing

Setting prices based on what is traditionally expected or accepted within the market or among competitors.

Cost-plus Pricing

An approach to pricing in which a sale price is established by adding a specific extra amount to the product's per-unit cost.

Target Profit Pricing

Setting a product price based on a predetermined profit objective, rather than market or competitive conditions.

Return-on-investment (ROI)

A financial metric utilized to evaluate the efficiency of an investment or compare the efficiency of several different investments.