The Following Information Pertains to Questions

question 75

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 $200,000 in return for investing its plant and equipment.What would be the recognizable gain on January 1,2010 arising from Jinxtor's investment?

• A)$75,000
• B)$50,000
• C)$200,000
• D)$300,000

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Definitions:

Raw Materials Inventories

Stocks of unprocessed materials that are used in the manufacturing process to produce finished goods.

Controlling

In management, the process of monitoring performance and taking action to ensure desired outcomes.

Directing

In management, directing refers to the process of guiding, leading, and overseeing employees to achieve organizational goals.

Planning

The process of setting objectives and determining the actions necessary to achieve them.