Assume that the facts provided above with respect to the Jinxtor joint venture remain unchanged except that John receives $200,000 in return for investing its plant and equipment. What would be the amount of the unrealized gain?
A) Nil
B) $67,500
C) $142,500
D)$225,000

Question

Quizplus · Accepted Answer

When John invests its plant and equipment for $200,000, the total investment in Jinxtor joint venture becomes $1,200,000 ($1,000,000 + $200,000). 
The fair value of the assets of the joint venture is $1,350,000, which is $150,000 ($1,350,000 - $1,200,000) more than the carrying amount of $1,200,000. 
Therefore, the unrealized gain on the investment is $67,500 ($150,000 x 45%).

Assume That the Facts Provided Above with Respect to the Jinxtor