Base Inc. (Base) and Space Ltd. (Space) formed a joint venture, Moon Ltd., on January 1, 2023. Base invested plant and equipment with a book value of $300,000 and a fair value of $900,000 for a 30% interest in the joint venture. Base's plant and equipment were estimated to provide an additional 5 years of utility to Moon. Space contributed assets with a fair value of $2,100,000 for its 70% stake in Moon. Moon reported a net income of $2,800,000 for 2023. The transactions set out above were considered to have commercial substance. Assuming the plant and equipment transferred by Base are used to generate a positive gross profit for Moon, what portion of the unrealized gain arising from the transfer of Base's assets is realized for 2023? Nil $10,800 $126,000 $36,000
Base Inc. (Base) and Space Ltd. (Space) formed a joint venture, Moon Ltd., on January 1, 2023. Base invested plant and equipment with a book value of $300,000 and a fair value of $900,000 for a 30% interest in the joint venture. Base's plant and equipment were estimated to provide an additional 5 years of utility to Moon. Space contributed assets with a fair value of $2,100,000 for its 70% stake in Moon. Moon reported a net income of $2,800,000 for 2023. The transactions set out above were considered to have commercial substance. Assuming the plant and equipment transferred by Base are used to generate a positive gross profit for Moon, what portion of the unrealized gain arising from the transfer of Base's assets is realized for 2023? Nil $10,800 $126,000 $36,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
K89.
Transcribed Image Text:Base Inc. (Base) and Space Ltd. (Space) formed a
joint venture, Moon Ltd., on January 1, 2023.
Base invested plant and equipment with a book
value of $300,000 and a fair value of $900,000
for a 30% interest in the joint venture. Base's
plant and equipment were estimated to provide
an additional 5 years of utility to Moon.
Space contributed assets with a fair value of
$2,100,000 for its 70% stake in Moon.
Moon reported a net income of $2,800,000 for
2023.
The transactions set out above were considered
to have commercial substance.
Assuming the plant and equipment transferred
by Base are used to generate a positive gross
profit for Moon, what portion of the unrealized
gain arising from the transfer of Base's assets is
realized for 2023?
Nil
$10,800
$126,000
$36,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education