Assume that fast-food restaurants generally provide an ROI of 10%, but that such a restaurant near a college campus has an ROI of 16% 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 $500,000. If investors were to invest that amount in a restaurant elsewhere in town, they could expect a 10% ROI.

Required:

a. Would investors be willing to pay more than $500,000 for the restaurant near the campus? Explain your answer.
b. If an investor group purchased the restaurant near the campus for $800,000 and the fair value of the assets they acquired was $500,000, what balance sheet accounts would be used to record the cost of the restaurant?