On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint venture, Okanagan Inc. Shuswap contributed equipment with a book value of $900,000 and a fair value of $2,100,000 for a 50% interest in the joint venture On December 31, Year 8, Okanagan Inc. reported a net income of $612,000. The equipment transferred has an estimated useful life of 20 years. Ignore taxes. Assume the transaction does not have commercial substance because Shuswap Ltd. owned a similar portion of the same type of equipment both before and after the contribution to the joint venture. Calculate the gain on the contribution of equipment and prepare the journal entries for Shuswap Inc. to record the events on January 1 and December 31, Year 8, including Shuswap's share of profit.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint
venture, Okanagan Inc. Shuswap contributed equipment with a book value of
$900,000 and a fair value of $2,100,000 for a 50% interest in the joint venture.
On December 31, Year 8, Okanagan Inc. reported a net income of $612,000.
The equipment transferred has an estimated useful life of 20 years. Ignore
taxes.
Assume the transaction does not have commercial substance because
Shuswap Ltd. owned a similar portion of the same type of equipment both
before and after the contribution to the joint venture.
Calculate the gain on the contribution of equipment and prepare the journal
entries for Shuswap Inc. to record the events on January 1 and December 31,
Year 8, including Shuswap's share of profit.
Transcribed Image Text:On January 1, Year 8, Shuswap Inc. and Kalamalka Inc. formed a new joint venture, Okanagan Inc. Shuswap contributed equipment with a book value of $900,000 and a fair value of $2,100,000 for a 50% interest in the joint venture. On December 31, Year 8, Okanagan Inc. reported a net income of $612,000. The equipment transferred has an estimated useful life of 20 years. Ignore taxes. Assume the transaction does not have commercial substance because Shuswap Ltd. owned a similar portion of the same type of equipment both before and after the contribution to the joint venture. Calculate the gain on the contribution of equipment and prepare the journal entries for Shuswap Inc. to record the events on January 1 and December 31, Year 8, including Shuswap's share of profit.
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