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On January 1, 20X5, NAAA Inc. and ASD Inc. formed a joint venture called Jesvic Ltd. NAAA invested plant and equipment with a carrying value of $500,000 and a fair value of $800,000 for a 30% interest in the venture. ASD contributed assets with a fair value of $2,000,000 (including $200,000 in cash) for a 70% stake in Jesvic. The fair value of the assets contributed by ASD was the same as their carrying value. Jesvic reported net income of $100,000 for 20X5. NAAA's plant and equipment were estimated to provide an additional five years of utility to Jesvic. Both companies pay income tax at a rate of 20%, and both companies as well as the joint venture have a December 31, 20X5, year end. Assume that the transaction has commercial substance.
Question 1: At what amount would ASD record its investment in Jesvic on January 1, 20X5?
a) $1,400,000
b) $1,800,000
c) $1,960,000
d) $2.000,000
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