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: $ 15,000 cash and a 2-year $60,000 note, payable to the firm, with 12 percent interest on the unpaid balance.
Required
a. Record the formation using the goodwill approach.
b. Record the formation using the bonus approach.