Reference no: EM132789718
Question - On January 1, 2017, Green Ltd and Yellow Ltd formed Rainbow Resources, a joint venture.
Yellow contributed miscellaneous assets with a fair value of $951,000 for a 55%interest in the venture.
Green contributed equipment with a carrying amount of $312,000 and a fair value of $1,240,000 and received a 45% interest in the venture plus $462,000 in cash. the useful life for the equipment is 20 years.
On December 31,2017, Rainbow reported a profit of $192,000 and declared a dividend of $87,000
Greeen has a December 31 year-edn and will account for its 45% interest using the equity method.
Required - Assume that the miscellaneous assets contributed by Yellow included cash of $462,000. Also, assume that the transaction had commercial substance when Green transferred the equipment to the joint venture.
1) Record Green's investment and transfer of assets to Rainbow Resource?
2) What is the net amount of investment in Rainbow (ending balance) that approx in Green's Dec 31, 2017 balance sheet?
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