A. 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.
B. 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.
On January 1, NewTune Company exchanges 17,590 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune's 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-Go's fair value. NewTune also paid $30,100 in stock registration and issuance costs in connection with the merger. Several of On-the-Go's accounts' fair values differ from their book values on this date (credit balances in parentheses): Values Receivables Trademarks Record music catalog In-process research and development Notes payable Book Fair Values $ 79,250 $ 77,150 115,000 265,000 61,500 183,750 0 258,000 (62,750) (54,100) Precombination book values for the two companies are as follows: NewTune On-the-Go Cash $ 76,750 $ 36,250 Receivables 85,250 79,250 Trademarks 478,000 115,000 Record music catalog 896,000 61,500 Equipment (net) 341,000 129,000 Total Assets $ 1,877,000 $ 421,000 Accounts payable $ (145,000) $ (46,750) Notes payable (396,000) (62,750) Common stock (400,000) (50,000) Additional paid-in capital (30,000) (30,000) Retained earnings (906,000) (231,500) Total liabilities and equities $(1,877,000) $(421,000) Required A Required B Assume that this combination is a statutory merger so that On-the-Go's accounts will be transferred to the records of New Tune. 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 Accounts payable Notes payable Cash Receivables Trademarks Common stock Additional paid-in capital Retained earnings Record music catalog In-process research and development Equipment (net) Goodwill Total assets 0 Total liabilities and equities $ 0 Assume that no dissolution takes place in connection with this combination. Ratner, Dotn companies retain their separate iegai identities. Prepare a worksheet to consolidate the two companies as of the combination date. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) Show less NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 20XX Consolidation Entries On-the-Go, Newtune Co Debit Credit Inc. Accounts Consolidated Totals Cash Receivables Investment in On-the-Go Trademarks Record music catalog In-process research and development Equipment (net) Goodwill Total assets $ 0 $ 0 $ 0 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $ ol$ ol$ o $ ol$ 0
