Sienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing agreements have a fair value of $905,000 and represent Sienna's sole asset. Although Sienna currently has no liabilities, the company has a $188,000 net operating loss (NOL) carry-forward because of recent operating losses.

On January 1, 2021, Paoli, Inc., acquired all of Sienna's voting stock for $1,130,000. Paoli expects to extract operating synergies by integrating Sienna's software into its own products. Paoli also hopes that Sienna will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 21 percent.

A. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carry-forward, how much goodwill should Paoli recognize from the acquisition?. B. If there is a less than 50 percent chance that the subsidiary will be able to utilize the NOL carry-forward, how much goodwill should Paoli recognize from the acquisition?

\begin{tabular}{|l|l|l|} \hline & & Amount \\ \hline a. & Goodwill & \\ \hline b. & Goodwill & \\ \hline \end{tabular}