Bank One Corp

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School

University of Utah *

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ADVANCED

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Accounting

Date

Feb 20, 2024

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xlsx

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Uploaded by MajorRatPerson986

In determining the purchase price for its interest in Ingersoll-Rand, Bank One Corp. made the following computati Ingersoll-Rand's pretax financial income for each of the 7 years prior to the acquisition was: For the year ended December 31, 2007 For the year ended December 31, 2008 For the year ended December 31, 2009 For the year ended December 31, 2010 For the year ended December 31, 2011 For the year ended December 31, 2012 For the year ended December 31, 2013 Loss from discontinued operations for the year ended December 31, 2012 Extraordinary loss for the year ended December 31, 2013 At the time of the acquisition, the normal rate of return on net assets for Ingersoll-Rand's industry was 6%. Ingers Balance Sheet Account Book Value Cash $ 33,783 Accounts receivable 44,723 Inventory 135,275 Prepaid expenses 14,076 Land 105,342 On January 1, 2014, Bank One Corp. acquired 100% of Ingersoll-Rand by exchanging 22,579 shares (on a taxable stock for shares of Ingersoll-Rand. On the date of acquisition, Bank One Corp.’s common stock was trading at $3 Exchange. Bank One Corp. also incurred $40,000 of costs in connection with the acquisition. Bank One Corp. believed that the average of the 7 years' earnings represented a fair estimate of the annual indefinite future. However, it made adjustments to earnings for depreciation (computed and shown below) of th book values of BUILDINGS and EQUIPMENT acquired in the acquisition of Ingersoll-Rand, and for losses extraordinary losses that it believed would NOT be included in the pretax earnings of Ingersoll-Rand following the depreciation expense increases pretax earnings): Annual (reduction)/increase in depreciation expense on buildings Annual (reduction)/increase of depreciation expense on equipment To determine the goodwill on the acquisition of Ingersoll-Rand, Bank One Corp. capitalized the excess earnings of 17% rate of return (e.g., the return on net assets that Bank One Corp. requires when making any investment decis As of the date of acquisition, Ingersoll-Rand had the following book-value balance sheet. An independent appra liabilities as of the date of acquisition resulted in fair values shown to the right of each respective asset/liability.

Buildings, net 116,652 Equipment, net 317,924 Patent, net 34,464 Goodwill 15,777 Total assets $ 818,016 Accounts payable $ 72,891 Total liabilities $ 72,891 Common stock, $1 par value 91,314 APIC 206,349 Retained earnings 447,462 Total liabilities and shareholders' equity $ 818,016 Ingersoll-Rand and Bank One Corp. depreciate all fixed assets on a straight-line basis. Except in the case of lease and intangible assets is zero. The salvage value of leased equipment is determined by applying the rules that go The remaining useful life of the assets and liabilities acquired are shown above. The inventory shown above, if a period(s) noted above. Bank One Corp. has a calendar year-end, a corporate tax rate of 29%, and uses the FULL-EQUITY METHOD to acco Rand.

Buyer: Bank One Corp Seller: Ingersoll-Rand tions and assumptions: $ 87,000 87,000 11,000 11,000 28,000 28,000 10,000 10,000 82,000 82,000 88,000 88,000 95,000 95,000 401,000 $ 124 7 (865) (737) 7 5,158 57,000 57,000 59,000 59,000 521,293 7 74,470 Step 1 726,528 6% 43,592 Step 2 30,879 Step 3 soll-Rand Company Fair Value (30,879) $ 33,783 12 44,723 17% 123,331 2 14,076 154,035 Step 4 119,579 e basis) of its $1 par value common 39 per share on the New York Stock earnings of Ingersoll-Rand for the he difference between the fair and on discontinued operations and e acquisition (NOTE: a reduction to f Ingersoll-Rand for 12 years using a sion). aisal of Ingersoll-Rand's assets and Remaining Life (Yrs)

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