On January 1, New Tune Company exchanges 16,705 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of New Tune'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. New Tune also paid $24,100 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: Receivables Trademarks Record music catalog In-process research and development Notes payable Book Values Fair Values $ 64,250 $ 57,700 102,000 235,500 65,750 247,250 0 216,000 (59,750) (53,550) Precombination book values for the two companies are as follows: Cash Receivables Trademarks Record music catalog Equipment (net) Totals Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Totals New Tune 64,750 76,250 470,000 896,000 413,000 $ 1,920,000 $ (154,000) (427,000) (400,000) (30,000) (909,000) $(1,920,000) On-the-Go $ 31,500 64,250 102,000 65,750 106,000 $ 369,500 $ (34,750) (59,750) (50,000) (30,000) (195,000) $ (369,500) a. 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 New Tune 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. NEWTUNE COMPANY AND ON-THE-GO, INC. Post-Combination Balance Sheet January 1, 2018 Assets Liabilities and Stockholders' Equity Cash Accounts payable Receivables Notes payable Trademarks Common stock Record music catalog ditional paid-in capital Research a.d development asset Retained earnings Equipment Goodwill Total assets Total liabilities and equities In accounting for the combination of New Tune and On-the-Go, the fair value of the acquisition is allocated to each identifiable asset and liability acquired with any remaining excess attributed to goodwill. Fair value of consideration transferred (shares issued) Fair value of net assets acquired: Cash Receivables Trademarks Record music catalog In-process research and development Equipment Accounts payable Notes payable Goodwill Journal entries by New Tune to record combination with On-the-Go: Debit Credit General Journal Cash Receivables Trademarks Record Music Catalog Research and Development Asset Equipment Goodwill Accounts Payable Notes Payable Common Stock (New Tune par value) Additional Paid-in Capital (To record merger with On-the-Go at fair value) Additional Paid-In Capital Cash (Stock issue costs incurred) Because On-the-Go continues as a separate legal entity, New Tune first records the acquisition as an investment in the shares of On- the-Go. Debit Credit General Journal Investment in On-the-Go. Common Stock (New Tune, Inc., par value) Additional Paid-in Capital (To record acquisition of On-the-Go's shares) Additional Paid-In Capital Cash (Stock issue costs incurred) Consolidated Totals NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 2018 Consolidation Entries On-the-Go, Accounts Newtune Co Inc. Debit Credit Cash Receivables Investment in On-the-Go Trademarks Record music catalog Research and development asset Equipment Goodwill Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities