Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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:

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
Totals $ 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 )
Totals $ (1,845,000 ) $ (117,250 )
  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 post-combination balance sheet for NewTune as of the acquisition date.
  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.

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_2

Step: 3

blur-text-image_3

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

Principles Of Sustainable Finance

Authors: Dirk Schoenmaker, Willem Schramade

1st Edition

0198826605, 978-0198826606

More Books

Students also viewed these Finance questions

Question

Who holds the power in recruitment and selection?

Answered: 1 week ago

Question

Explain the effectiveness of various selection methods

Answered: 1 week ago

Question

Explain the nature of attraction in recruitment

Answered: 1 week ago