Problem 2-33 (LO 2-4, 2-5, 2-6a, 2-6b, 2-6c, 2-7, 2-8) On January 1, NewTune Company exchanges 17,949 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 $23,500 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 $ 35,250 $ 29,150 Trademarks 102,500 255,500 Record music catalog 80,000 267,500 In-process research and development 0 223,500 Notes payable (66,250 ) (56,900 ) Precombination book values for the two companies are as follows: NewTune On-the-Go Cash $ 74,000 $ 30,000 Receivables 128,000 35,250 Trademarks 411,000 102,500 Record music catalog 928,000 80,000 Equipment (net) 379,000 166,000 Totals $ 1,920,000 $ 413,750 Accounts payable $ (189,000 ) $ (51,500 ) Notes payable (465,000 ) (66,250 ) Common stock (400,000 ) (50,000 ) Additional paid-in capital (30,000 ) (30,000 ) Retained earnings (836,000 ) (216,000 ) Totals $ (1,920,000 ) $ (102,500 ) 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. 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. 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, 2018 Assets Liabilities and Stockholders' Equity Cash Accounts payable Receivables Notes payable Trademarks Common stock Record music catalog Additional paid-in capital Research and development asset Retained earnings Equipment Goodwill Total assets $0 Total liabilities and equities $0 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 NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 2018 Consolidation Entries Accounts Newtune Co On-the-Go, Inc. Debit Credit Consolidated Totals Cash Receivables Investment in On-the-Go Trademarks Record music catalog Research and development asset Equipment Goodwill Total assets $0 $0 $0 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $0 $0 $0 $0 $0