Reference no: EM132755025

John Inc and Victor Inc. formed a joint venture on January 1, 2020. John invested plant and equipment with a book value of $500,000 and a fair value of $800,000 for a 30% interest in the venture which was to be called Jinxtor Ltd.

• Victor contributed assets with a fair value of $2,000,000 (including $200,000 in cash) for its 70% stake in Jinxtor.
• Jinxtor reported a net income of $3,000,000 for 2020. John's plant and equipment were estimated to provide an additional 5 years of utility to Jinxtor. The transactions set out above were considered to have commercial substance.

Problem 1: What is Victor's portion of any unrealized gain or loss arising from the transfer of John's assets to Jinxtor on January 1, 2020?

Multiple Choice

Option 1: $210,000
Option 2: $300,000
Option 3: $90,000
Option 4: Nil