Case 05-3 Cherry Banana Inc. (Banana) is a publicly traded company that manufactures fruity beverages During the current year, Banana decided to add a series of mango-flavored beverages t its current product line. Management anticipated that the costs associated with developing the new product line and ramping up production would be significant. In an effort to defray some of the costs and manage the risk associated with the new product line in 2010, Banana identified a partner, Terry Inc. (Berry), and together they created a separate legal entity, Cherry LLC (Cherry), and entered into a joint venture amangement. Bery is a publicly traded subsidiary of intemational conglomerate Berry Cherry Toc, a privately hold corporation with significant cash reserves. Berry and Banana are unrelated parties Banana Inc. Berry Inc. . . Cobal property with a fair value of 50 million and $30 C530 milion wock and right to apply s ww and hardw Cherry LLC (Joint Venture) Key terms of the joint venture arrangement are as follows: Banana contributed intellectual property with a fair value of $60 million, plus cash of $20 million, in return for 80 percent of the common stock of the joint venture. The contributed intelectual property consisted of certain license agreements acquired by Banana in a business combination during fiscal year 2003. The license agreements had been recorded at fair value at the time of the business.combination.