Remax and Rex Inc, both Canadian private companies, formed a joint venture on January 1, 2020 called John Inc Inc. Remax and Rex each hold a 50% in the venture and share equally in any profits or losses arising from the venture.

The following statements were prepared on December 31, 2020.

Balance Sheets

Remax

John Inc

Current Assets

$40,000

$20,000

Investment in John Inc

$20,000

Fixed Assets

$200,000

$80,000

Accumulated Depreciation

($80,000)

($10,000)

Other Assets

$50,000

$60,000

Total Assets

$230,000

$150,000

Current Liabilities

$34,000

$70,000

Long-Term Debt

$20,000

$30,000

Common Shares

$90,000

$40,000

Retained Earnings, Jan 1

$56,000

Net Income for the year

$30,000

$10,000

Liabilities and Equity

$230,000

$150,000

Other Information:

During 2020, John Inc purchased $10,000 from Remax. Remax recorded a gross profit of $2,000 on these sales.

On December 31, 2020, John Inc's inventories contained half of the merchandise purchased from Remax. Remax uses the cost method to account for its Investment in John Inc and uses the equity method to report its investment in the joint venture. An income tax allocation rate of 20% applies.

(a) Compute the investment income (i.e. equity method income) from the joint venture for 2020.

(b) Compute Remax's Retained Earnings as at December 31, 2020.

(c ) Prepare Remax's Balance Sheet as at December 31, 2020.

(d) Assume Remax and Rex formed a joint operation instead of a joint venture. Remax has proportionate rights (50%) to all of John Inc's assets and proportionate responsibilities (50%) for all of John Inc's liabilities. Prepare Remax's Proportionately Adjusted Balance Sheet as at December 31, 2020.