John Inc and Victor Inc for its 70% stake in Jinxtor. Jinxtor reported a net income of $3,000,000 for 2013. John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor. What is John's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1, 2013?

Question

Quizplus · Accepted Answer

John's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1, 2013, is $90,000. This is calculated as follows:Unrealized gain or loss = (Fair value of assets transferred - Book value of assets transferred) * Percentage of ownershipFair value of assets transferred = $3,000,000Book value of assets transferred = $2,100,000Percentage of ownership = 70%Unrealized gain or loss = ($3,000,000 - $2,100,000) * 70%Unrealized gain or loss = $900,000 * 70%Unrealized gain or loss = $90,000

John Inc and Victor Inc for Its 70% Stake in Jinxtor