A CorpAnd B Corp

question 67

Essay

A Corp.and B Corp.formed a joint venture called C Corp.on January 1,2010.On that date,B Corp.invested assets with a fair value of $700,000 for its 65% stake in C Corp.A Corp.contributed machinery and equipment with a book value of $200,000 and a fair value of $800,000 as well as $400,000 in cash in return for its 35% stake in the venture.
On December 31,2010,C Corp.reported a net income of $300,000 and declared dividends in the amount of $50,000.The machinery and equipment are estimated to have an estimated useful life of 10 years.
-Prepare A Corp.'s equity method journal entries for 2010,assuming that the assets donated by B Corp did not include cash.

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Definitions:

Investment

Allocation of resources, usually money, in expectation of a future financial return or benefit.

Ordinary Annuity

An annuity in which payments are made at the end of each period, such as monthly or annually, commonly found in loans and savings plans.

Compounded Annually

Interest calculation method where the interest is calculated once per year and added to the principal sum, affecting the calculation of future interest.

Compounded Semi-annually

Interest calculation method where interest is added to the principal twice a year, allowing the interest to grow faster than simple interest.