Kivi Service Stations is considering expanding its

operations to include
Kivi Service Stations is considering expanding its operations to include the greater Dubuque
area. Rather 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. Information relating to each of these service stations is presented
below:Instructionsa. Compute 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. Compute an estimated fair
value for any goodwill associated with Kivi purchasing Gas N’ Go. Base your computation upon
an assumption that Kivi’s management expects excess earnings to continue for four years.c.
Many of Kivi’s existing service stations are extremely profitable. If Kivi acquires Joe’s Garage
or Gas N’ Go, should it also record the goodwill associated with its existing locations?Explain.
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Kivi Service Stations is considering expanding its operations to include
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