Sienna Company developed a specialized banking application software program that it licenses to various financial instit

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Sienna Company developed a specialized banking applicationsoftware program that it licenses to various financial institutionsthrough multiple-year agreements. On January 1, 2021, theselicensing agreements have a fair value of $827,500 and representSienna's sole asset. Although Sienna currently has no liabilities,the company has a $122,000 net operating loss (NOL) carry-forwardbecause of recent operating losses.
On January 1, 2021, Paoli, Inc., acquired all of Sienna's votingstock for $995,000. Paoli expects to extract operating synergies byintegrating Sienna's software into its own products. Paoli alsohopes that Sienna will be able to receive a future tax reductionfrom its NOL. Assume an applicable federal income tax rate of 21percent.
If there is a greater than 50 percent chance that the subsidiarywill be able to utilize the NOL carry-forward, how much goodwillshould Paoli recognize from the acquisition?
If there is a less than 50 percent chance that the subsidiarywill be able to utilize the NOL carry-forward, how much goodwillshould Paoli recognize from the acquisition?