Intangible Assets
Response to the following problem:
Renford Company owns two restaurants. One, located in Tacoma, was purchased from a previous owner and the other, located in Seattle, was built by Renford Company. The restaurant was built nine years ago. The Tacoma restaurant was purchased last year and has goodwill of $550,000 on the books. As it turns out, the Seattle restaurant does twice as much business as the Tacoma restaurant and is much more profitable. The Seattle restaurant is in a prime location, and business keeps increasing each year. The Tacoma restaurant does about the same amount of business each year, and it doesn't look as if it will ever do any better. Does it make sense to you to have goodwill on the books of the less profitable restaurant?
Should Renford record goodwill on the books of the Seattle restaurant, or should it write off the goodwill on the Tacoma restaurant's books?