as On January 1, NewTune Company exchanges 17,953 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 $30,000 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): Book Fair Values Values Receivables $ 39,000 $ 34,550 Trademarks 105,500 299,000 Record music catalog 68,250 262,500 In-process research and development Notes payable 0 210,000 (50,750) (44,900) Precombination book values for the two companies are as follows: New Tune On-the-Go Cash 83,500 $ 38,250 Receivables 74,500 39,000 Trademarks 426,000 105,500 Record music catalog. Equipment (net) 916,000 68,250 393,000 123,000 Total Assets $ 1,893,000 $ 374,000 Accounts payable Notes payable Common stock Additional paid-in capital 5 (112,000) $ (52,750) (443,000) (50,750) (400,000) (50,000) (30,000) (30,000) (908,000) (190,500) $(1,893,000) $(374,000) Retained earnings Total liabilities and equities a. Assume that this combination is a statutory merger so that On-the-Go's 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. Required A Required B Assume that this combination is a statutory merger so that On-the-Go's accounts will be transferred t New Tune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a postcombina New Tune as of the acquisition date. NEWTUNE COMPANY AND ON-THE-GO, INC. Post-Combination Balance Sheet January 1, 20XX Assets Liabilities and Equity Cash 91,750 Accounts payable 164,750 487,900 Receivables 109,050 Notes payable Trademarks 725,000 Common stock 471,812 Record music catalog 1,178,500 Additional paid-in capital 30,000 In-process research and development 210,000 Retained earnings 1,733,838 Equipment (net) 516,000 Goodwill 63,000 Total assets $ 2,893,300 Total liabilities and equities $ 2,888,300 Required A $ Required B > $ Required A Required 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. (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 A NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 20XX Consolidation Entries Accounts Debit Credit Consolidated Totals 91,750 $ 91,750 Cash Receivables 109,050 109,050 Investment in On-the-Go Trademarks 725,000 725,000 Record music catalog 1,178,500 1,175,000 In-process research and development 210,000 210,000 Equipment (net) 516,500 516,000 63,000 Goodwill 63,000 Total assets $ 2,889,800 Accounts payable Notes payable Common stock On-the-Go, Inc. Newtune Co $ 53,500 $ 74,500 426,000 916,000 393,000 63,000 $ 1,926,000 $ $ 112,000 $ 443,000 400,000 38,250 $ 34,550 299,000 262,500 210,000 123,000 967,300 52,750 44,900 71,812