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Prepare the January journal entry to record the formation

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Question - Bob Arnold is a well-known real estate developer in Santa Fe, New Mexico. He wants to remodel a building and convinces George Mitchell, a local businessperson, to contribute the capital to form a partnership. On January 1, 2020, Mitchell invests a building worth $162,000 and equipment valued at $32,000 as well as $25,000 in cash. Although Arnold makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances.

Required -

(A) Prepare the January 1, 2020 journal entry to record the formation of the partnership assuming the bonus method is used.

(B) Prepare the January 1, 2020 journal entry to record the formation of the partnership assuming the goodwill method is used.

Reference no: EM132514538

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