On January 1, Year 1, Amco Ltd. and Newstar Inc. formed Bearcat Resources, a joint venture. Newstar contributed miscellaneous assets with a fair value of $1,692,000 for a 65% interest in the venture. Amco contributed plant and equipment with a carrying amount of $1,120,000 and a fair value of $1,380,000, and received a 35% interest in the venture as well as $469,000 in cash. On December 31, Year 1, Bearcat reported a profit of $199,000 and declared a dividend of $94,000. Amco has a December 31 year-end and will account for its 35% interest using the equity method. (Assume a 20-year useful life for the plant and equipment.) Required (a) Assume that the miscellaneous assets contributed by Newstar included cash of $469,000. Also assume that the transaction had commercial substance when Amco transferred the plant and equipment to the joint venture. Prepare Amco's Year 1 journal entries. b) Assume that there was no cash in the assets contributed by Newstar and that the cash received by Amco had been borrowed by Bearcat. Also assume that the transaction did not have commercial substance when Amco transferred the plant and equipment to the joint venture. Prepare Amco's Year 1 journal entries.

On January 1, Year 1, Amco Ltd. and Newstar Inc. formed Bearcat Resources, a joint venture. Newstar contributed miscellaneous assets with a fair value of $1,692,000 for a 65% interest in the venture. Amco contributed plant and equipment with a carrying amount of $1,120,000 and a fair value of $1,380,000, and received a 35% interest in the venture as well as $469,000 in cash. On December 31, Year 1, Bearcat reported a profit of $199,000 and declared a dividend of $94,000. Amco has a December 31 year-end and will account for its 35% interest using the equity method. (Assume a 20-year useful life for the plant and equipment.) Required (a) Assume that the miscellaneous assets contributed by Newstar included cash of $469,000. Also assume that the transaction had commercial substance when Amco transferred the plant and equipment to the joint venture. Prepare Amco's Year 1 journal entries. b) Assume that there was no cash in the assets contributed by Newstar and that the cash received by Amco had been borrowed by Bearcat. Also assume that the transaction did not have commercial substance when Amco transferred the plant and equipment to the joint venture. Prepare Amco's Year 1 journal entries.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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