Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

تمرين 38

Accounting for Goodwill
Kivi Service Stations is considering expanding its operations to include the greater Dubuque area.ather than build new service stations in the Dubuque area, management plans to acquire existing service stations and convert them into Kivi outlets.
Kivi is evaluating two similar acquisition opportunities.nformation relating to each of these service stations is presented below:

Instructions
a.ompute an estimated fair value for any goodwill associated with Kivi purchasing Joe's Garage, Base your computation upon an assumption that successful service stations typically sell at about 9.25 times their annual earnings.
b.ompute an estimated fair value for any goodwill associated with Kivi purchasing Gas N' Go.ase your computation upon an assumption that Kivi's management expects excess earnings to continue for four years.
c.any of Kivi's existing service stations are extremely profitable.f Kivi acquires Joe's Garage or Gas N' Go, should it also record the goodwill associated with its existing locations Explain.