On January 1, NewTune Company exchanges 15,000 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 $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 companies

retain their separate legal identities. Prepare a worksheet to consolidate the two companies

as of the combination date.

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

(Attached picture is the templet of the work sheet, please use this templet when preparing the work sheet)

19. NEWTUNE, INC., AND ON-THE-GO CO. Consolidation Worksheet January 1, 2009 Consolidation Entries NewTune, Inc. On-the-Go Co. Accounts Consolidated Totals Cash Receivables Investment in On-the-Go 35,000 150,000 750,000 29,000 65,000 -0- Trademarks Record music catalog Capitalized R&D Equipment Goodwill Totais Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Totals 400,000 840,000 -0- 320,000 -0- 2.495.000 110,000 370,000 460,000 695,000 860,000 2.495.000 95,000 60,000 -0- 105,000 -0- 354,000 34,000 50,000 50,000 30,000 190,000 354.000