Max, Nat and Roberta formed a partnership to operate a dry-cleaning business. They agreed to share initial capital and subsequent income in a 3:2:1 ratio. Each partner's contributions to the new venture are listed next.
Max: $20,000 cash, dry-cleaning equipment worth $150,000 and the ability to keep the equipment in good operating condition.
Nat: $40,000 cash and extensive experience in the dry-cleaning business.
Roberta: $9,000 cash and a 2-year $54,000 note, payable to the firm, with 12 percent interest on the unpaid balance.
(a) Record the formation using the goodwill approach.
Cash - $69000
Note receivable - $54000
Equipment - $150000
Goodwill - $$ ?
Capital - Max -- $$?
Capital - Nat --$$
Capital - Roberta -- $$
(b) Record the formation using the bonus approach.
Cash - $69000
Note receivable - $54000
Equipment - $150000
Capital - Max -- $$?
Capital - Nat --$$
Capital - Roberta -- $$