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Patel and Rao decide to form a partnership. Patel contributes $300,000 in cash. Rao contributes buildings and equipment with a fair market value of $500,000,
Patel and Rao decide to form a partnership. Patel contributes $300,000 in cash. Rao contributes buildings and equipment with a fair market value of $500,000, subject to a mortgage of $150,000, which the partnership assumes. Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 60% to Patel, and 40% to Rao. If the goodwill approach to partnership formation is used, the initial entry to record the formation of the partnership will recognize goodwill of:
A. | $225,000 | |
B. | $150,000 | |
C. | $400,000 | |
D. | $375,000 |
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