Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2015, NewTune Company exchanges 17,496 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTunes

On January 1, 2015, NewTune Company exchanges 17,496 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 $31,250 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:

Book Values Fair Values
Receivables $ 79,000 $ 72,100
Trademarks 99,250 260,500
Record music catalog 80,000 240,500
In-process research and development 0 231,000
Notes payable (60,750 ) (51,400 )

Precombination January 1, 2015, book values for the two companies are as follows:

NewTune On-the-Go
Cash $ 60,750 $ 35,750
Receivables 96,250 79,000
Trademarks 404,000 99,250
Record music catalog 923,000 80,000
Equipment (net) 365,000 112,000
Totals $ 1,849,000 $ 406,000
Accounts payable $ (189,000 ) $ (58,250 )
Notes payable (416,000 ) (60,750 )
Common stock (400,000 ) (50,000 )
Additional paid-in capital (30,000 ) (30,000 )
Retained earnings (814,000 ) (207,000 )
Totals $ (1,849,000 ) $ (406,000 )

Note: Parentheses indicate a credit balance.

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. (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.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Cases An Interactive Learning Approach

Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt

6th edition

133852105, 978-0133852103

More Books

Students also viewed these Accounting questions

Question

The impact of culture on health

Answered: 1 week ago

Question

What is your least favorite U.S. dialect? Why?

Answered: 1 week ago