On January 1, NewTune Company exchanges 19,633 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune'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. NewTune also paid $45,550 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 (credit balances in parentheses): Receivables Trademarks Record music catalog In-process research and development Notes payable Book Fair Values Values $ 62,500 $ 60,400 105,500 294,500 75,750 270,000 0 243,000 (67,000) (61,700) Precombination book values for the two companies are as follows: NewTune On-the-Go Cash $ 76,000 $ 52,750 Receivables 162,000 62,500 Trademarks 485,000 105,500 Record music catalog 875,000 75,750 Equipment (net) 332,000 139,000 Total Assets $ 1,930,000 $ 435,500 Accounts payable $ (159,000) $ (51,500) Notes payable (451,000) (67,000) Common stock (400,000) (50,000) Additional paid-in capital (30,000) (30,000) Retained earnings (890,000) (237,000) Total liabilities and equities $(1,930,000) $(435,500) a. Assume that this combination is a statutory merger so that On-the-Go's accounts will be transferred to the records of Newlune. 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. Complete this question by entering your answers in the tabs below. Required A Required B 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 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 Accounts payable Receivables Notes payable Trademarks Common stock Record music catalog Additional paid-in capital In-process research and development Retained earnings Equipment (net) Goodwill Total liabilities and action Tatal mente 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. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) Show less A NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 20XX Consolidation Entries On-the-Go, Newtune Co Debit Credit Inc. Accounts Consolidated Totals Cash Receivables Investment in On-the-Go Trademarks Record music catalog In-process research and development Equipment (net) Goodwill $ 0$ 0 $ 0 Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $ 0 $ 0 $ 0 $ 0 $ 0
