On January 1, Year 3, Plaster Industries Ltd. acquired 100% of the common shares of SAX Corporation for $1,900,000. On the acquisition date, the carrying value SAX's net assets was $1,500,000. The fair value of SAX's assets and liabilities approximated their fair value except as set out below:

	Fair value	Carrying value	Tax value
Equipment	$400,000	$350,000	$210,000
Building	1,400,000	1,150,000	950,000

Both companies have an income tax rate of 25%. Included in SAX's liabilities on the acquisition date was a deferred tax liability with a carrying value of $85,000. On the acquisition date, SAX had a loss carry-forward of $70,000. SAX had not previously recognized any benefit of this loss carry-forward as it was uncertain if it would have sufficient taxable income in the future to apply it against. Now that Plaster controls SAX, it is certain that it will be able direct enough taxable income into SAX to utilize the loss carry-forward.

Required:

Determine the amount of goodwill, if any, arising from Plaster's acquisition of SAX. Show your calculations.

Answer rating: 100% (QA)

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