Aa.29. John Inc and Victor Inc. formed a joint venture on January 1, 2020. John invested plant and equipment with a bookvalue 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 2020. John's plant and equipment were estimated to provide anadditional 5 years of utility to Jinxtor. The transactions set out above were considered to have commercial substance.What would be the recognizable gain on January 1, 2020 arising from John's investment in Jinxtor?Select one:OA NilOB. $210,000OC $90,000OD $300.000

A joint venture is essentially an entity that’s created by two or more parties, usually…

Answered: recognizable gain

Business

Accounting

recognizable gain

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Aa.29.

John Inc and Victor Inc. formed a joint venture on January 1, 2020. 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 2020. John's plant and equipment were estimated to provide an
additional 5 years of utility to Jinxtor. The transactions set out above were considered to have commercial substance.
What would be the recognizable gain on January 1, 2020 arising from John's investment in Jinxtor?
Select one:
OA Nil
OB. $210,000
OC $90,000
OD $300.000

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