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.

18. Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 40% to Patel, and 60% to Rao. If the goodwill approach to partnership formation is used, Raos initial capital balance is:

a. $410,000

b. $350,000

c. $400,000

d. $450,000

19. 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. $400,000

b. $150,000

c. $225,000

d. $375,000

20. 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, Raos initial capital balance is:

a. $425,000

b. $375,000

c. $525,000

d. $350,000