Ch 4: Outside Ownership
ACCT 501, SP 12
6. Example 1: Noncontrolling Interest
Assume that PJ Corporation acquired 90% of Slipper Company’s 10,000 shares of outstanding
stock.
At acquisition date, PJ assessed the total fair market value of Slipper’s net identifiable
assets (NIAs) at $500,000.
Although Slipper’s stock had been trading for $50 per share, PJ had to pay $60 per share to
induce enough stockholders to sell.
Required:
1) What is the fair value of the noncontrolling interest in Slipper?
$50,000.
2) What is the total acquisition-date fair value of Slipper Company?
$590,000.
3) Is there any acquired goodwill?
$90,000.
3.
Example 2 (in millions):
Pants pays $42.6 cash for 80% of the stock of Socks on January 1, 2010. Socks' book value
equals $10, consisting of $2.5 of stock and $7.5 of retained earnings. The book values of net
assets equal fair value except for previously unrecorded customer lists valued at $5 with a 4-
year life. The estimate of the fair value of the 20% noncontrolling interest is $8.4.
Required:
1) determine the amount of acquired goodwill.
Pants’ Acquisition cost
$ 42.6
Fair value of noncontrolling interest
8.4
Total fair value
51
Book value of Socks
(10)
Fair value in excess of Socks' book value
41
Difference between fair value and book value:
Customer lists
(5)
Goodwill
$ 36

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