John Inc and Victor Inc. formed a joint venture on January 1, 2020. John invested plant...

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. At what amount would John record its initial investment in Jinxtor?

Expert Solution

John's initial investment in Jinxtor = $800,000

Initial investment = Fair value

Fair value = $800,000

Therefore,

Initial investment = $800000

ekkarill92 answered 2 years ago

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