1) On January 1, NewTune Company exchanges 18,235 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTunes shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Gos fair value. NewTune also paid $24,100 in stock registration and issuance costs in connection with the merger.

Several of On-the-Gos accounts fair values differ from their book values on this date (credit balances in parentheses):

	Book Values			Fair Values
Receivables	$	42,750		$	38,400
Trademarks		118,750			308,500
Record music catalog		80,250			248,250
In-process research and development		0			218,250
Notes payable		(52,500	)		(46,100	)

Precombination book values for the two companies are as follows:

	NewTune			On-the-Go
Cash	$	66,500		$	31,750
Receivables		153,500			42,750
Trademarks		463,000			118,750
Record music catalog		851,000			80,250
Equipment (net)		333,000			117,000
Total Assets	$	1,867,000		$	390,500
Accounts payable	$	(151,000	)	$	(37,000	)
Notes payable		(406,000	)		(52,500	)
Common stock		(400,000	)		(50,000	)
Additional paid-in capital		(30,000	)		(30,000	)
Retained earnings		(880,000	)		(221,000	)
Total liabilities and equities	$	(1,867,000	)	$	(390,500	)

1. Assume that this combination is a statutory merger so that On-the-Gos accounts will be transferred to the records of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a postcombination balance sheet for NewTune as of the acquisition date.
2. Assume that no dissolution takes place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of the combination date.

• Required A
• Required B

Assume that this combination is a statutory merger so that On-the-Gos accounts will be transferred to the records of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a postcombination balance sheet for NewTune as of the acquisition date.

NEWTUNE COMPANY AND ON-THE-GO, INC.
Post-Combination Balance Sheet
January 1, 20XX
Assets		Liabilities and Equity
Cash		Accounts payable
Receivables		Notes payable
Trademarks		Common stock
Record music catalog		Additional paid-in capital
In-process research and development		Retained earnings
Equipment (net)
Goodwill
Total assets	$0	Total liabilities and equities	$0