On January 1, NewTune Company exchanges 15,000 shares of its common stock for all of the out- standing 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. New Tune also paid $25,000 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000 $ 63,000 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 225,000 Record music catalog . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 180,000 In-process research and development . . . . . . . . . . 0 200,000 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,000) (45,000) Precombination book values for the two companies are as follows:

NewTune On-the-Go Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 29,000 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 65,000 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 95,000 Record music catalog . . . . . . . . . . . . . . . . . . . . . . . . . 840,000 60,000 Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,000 105,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,770,000 $354,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (110,000) $ (34,000) Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (370,000) (50,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (400,000) (50,000) Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . (30,000) (30,000) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . (860,000) (190,000) Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,770,000) $(354,000)

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 com- panies retain their separate legal identities. Prepare a worksheet to consolidate the two compa- nies as of the combination date.

c. How do the balance sheet accounts compare across parts (a) and (b)?