In 1991 AT&T, the largest long-distance telephone operator in the U.S., paid $7.5 billion to acquire NCR,
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In 1991 AT&T, the largest long-distance telephone operator in the U.S., paid $7.5 billion to acquire NCR, a computer manufacturer. Prior to the acquisition, the book value of NCR’s assets was $4.5 billion, and its liabilities were $1.5 billion. Assuming that there was little significant difference between the fair value and the book value of NCR’s assets, show the effect of the acquisition on AT&T’s balance sheet from using
(a) the pooling of interests method and
(b) the purchase method.
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Authors: Krishna G. Palepu, Paul M. Healy, Victor Lewis Bernard, W.Gordon Filby
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