AAA and BBB formed a joint venture called CCC on January 1, 2022

Subject:AccountingPrice: Bought3

Share With

AAA and BBB formed a joint venture called CCC on January 1, 2022. Presented below are some relevant details on the establishment of this Joint Venture:

 

• All transactions were considered to be of commercial substance.
• The fiscal year end for all three entities (AAA, BBB, CCC) is December 31.
• AAA contributed plant and equipment with a fair value of $850,000.
• AAA's share in the venture was 40%; BBB's share is 60%.
• BBB contributed assets with a book value of $1,100,000
• All assets transferred had a remaining useful life of 12 years.
• At the end of 2022, AAA realized a gain of $8,450 for its share of contributed plant and equipment

Required:

 

Calculate the book value of plant and equipment contributed by AAA.

 

To assist you to respond, the following table may be helpful to guide your calculation.  As well consider first the value of the unrealized gain on the date of formation, based on the realized gain information provided. 

 

Fair Value of Assets contributed by AAA	$850,000
Book value of assets contributed by AA
Potential Gain
Unrealized - 40% (consider what is realized at the end of the year
Realized BBB share at 60%