On January 1, NewTune Company exchanges 17,360 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 $44,650 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 (credit balances in parentheses):

	Book Values			Fair Values
Receivables	$	44,250		$	41,300
Trademarks		117,250			277,750
Record music catalog		66,000			186,750
In-process research and development		0			261,000
Notes payable		(54,750	)		(48,350	)

Precombination book values for the two companies are as follows:

	NewTune			On-the-Go
Cash	$	62,000		$	50,250
Receivables		125,000			44,250
Trademarks		441,000			117,250
Record music catalog		873,000			66,000
Equipment (net)		344,000			108,000
Total Assets	$	1,845,000		$	385,750
Accounts payable	$	(150,000	)	$	(43,500	)
Notes payable		(378,000	)		(54,750	)
Common stock		(400,000	)		(50,000	)
Additional paid-in capital		(30,000	)		(30,000	)
Retained earnings		(887,000	)		(207,500	)
Total liabilities and equities	$	(1,845,000	)	$	(385,750	)

1. 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.

NEWTUNE COMPANY AND ON-THE-GO, INC.
Post-Combination Balance Sheet
January 1, 20XX
Assets		Liabilities and Equity
Cash	$67,600	Accounts payable	$193,500
Receivables	166,300	Notes payable	426,350
Trademarks	718,750	Common stock	469,440
Record music catalog	1,059,750	Additional paid-in capital	783,910
In-process research and development	261,000	Retained earnings	887,000
Equipment (net)	452,000
Goodwill	34,800
Total assets	$2,760,200	Total liabilities and equities	$2,760,200

2. 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.
Consolidation Worksheet
January 1, 20XX
			Consolidation Entries
Accounts	Newtune Co	On-the-Go, Inc.	Debit	Credit	Consolidated Totals
Cash	$17,350	$50,250			$67,600
Receivables	125,000	44,250		2,950	166,300
Investment in On-the-Go	868,000
Trademarks	441,000	117,250	160,500		718,750
Record music catalog	873,000	66,000	120,750		1,059,750
In-process research and development			261,000		261,000
Equipment (net)	344,000	108,000			452,000
Goodwill			34,800		34,800
Total assets	$2,668,350	$385,750			$2,760,200
Accounts payable	$150,000	$43,500			$193,500
Notes payable	378,000	54,750	6,400		426,350
Common stock	469,440	50,000	50,000		469,440
Additional paid-in capital	783,910	30,000	30,000		783,910
Retained earnings	887,000	207,500	207,500		887,000
Total liabilities and equities	$2,668,350	$385,750	$870,950	$2,950	$2,760,200