Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college campus has an ROI of 15% 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 $600,000. If you were to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI.
Required:
a. Would you be willing to pay more than $600,000 for the restaurant near the campus? Explain your answer.
b. If you purchased the restaurant near the campus for $750.000 and the fair value of the assets you acquired was $600,000, what balance sheet accounts would be used to record the cost of the restaurant?