Exercise 6-17 (Algo) Goodwill effect on ROI LO 9 Assume that fast-food restaurants generally provide an ROI of 16%, but that such a restaurant near a college campus has an ROI of 18% because its...

Assume that fast-food restaurants generally provide an ROI of 16%, but that such a restaurant near a college campus has an ROI of 18% because its relatively large volume of business generates an above-average turnover (sales/assets). The replacement value of the restaurant’s plant and equipment is $200,000. If you were to invest that amount in a restaurant elsewhere in town, you could expect a 16% ROI.



Required:
a-1.
Would you be willing to pay more than $200,000 for the restaurant near the campus?

multiple choice

• 
  
  
  

  Yes

  
  
  
  


• 
  
  
  

  No

  
  
  
  

a-2.
What is the maximum price you would be willing to pay for the business?
(Do not round intermediate calculations.)









b.
If you purchased the restaurant near the campus for $225,000 and the fair value of the assets you acquired was $200,000, identify the account along with its balance, that is used to record the additional amount paid over the fair value of the assets.