Business, 03.08.2021 15:20 chloeann5397

On January 1, 20X5, Meadow Inc. and Lark Inc. formed a joint venture called MLK Ltd. Meadow 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. Lark contributed assets with a fair value of $2,000,000 (including $200,000 in cash) for a 70% stake in MLK. The fair value of the assets contributed by Lark was the same as their carrying value. MLK reported net income of $100,000 for 20X5. Meadow’s plant and equipment were estimated to provide an additional five years of utility to MLK. Both companies pay income tax at a rate of 20%, and both companies, as well as the joint venture, have a December 31 year end. Assume that the transaction has commercial substance. Required:
What is the unrealized gain net of taxes arising from the transfer of Meadow’s assets toMLK on January 1, 20X5?

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On January 1, 20X5, Meadow Inc. and Lark Inc. formed a joint venture called MLK Ltd. Meadow invested...

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