Exercise $6-20($Algo$)$ Goodwill$$effect on ROI and operating income LO $6-9$

Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Company had operating income of $$64,000$ and net assets with a fair value of $$181,000.$ Takeover Company pays $$310,000$ for Target Company's net assets and business activities.

Required:

How much goodwill will result from this transaction?

Calculate the ROI for Target Company based on its present operating income and the fair value of its net assets.

Calculate the ROI that Takeover Company will earn if the operating income of the acquired net assets continues to be $$64,000.$

Takeover Company is willing to pay $$129,000$ more than fair value for the net assets acquired from Target Company as it represents goodwill and the expected superior earnings in future years.