On June 30, Malone Music Company exchanges 17,098 shares of its common stock for 100% of the outstanding shares of Nave Sound, Inc. Malone will maintain Nave as a wholly owned subsidiary, and Nave will retain its own legal and accounting status. Each of Malone'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 Nave's fair value. Malone also paid $26,700 in stock registration and issuance costs in connection with the merger. Just prior to the acquisition, the following data for Nave was available: Book Values Fair Values Receivables $ 60,500 $ 55,800 Trademarks 119,750 318,500 Licensed Song Lyrics 75,500 198,500 In-process Music Videos 0 213,000 Notes payable (70,500) (62,650) Malone and Nave had the following account balances just prior to the acquisition: Malone Cash $ 74,250 Receivables 80,750 Trademarks 423,000 Licensed Song Lyrics 854,000 Equipment (net) 386,000 Totals $ 1,818,000 Accounts payable $ (127,000) Notes payable (415,000) Common stock (400,000) Additional paid-in capital (30,000) Retained earnings (846,000) Totals $(1,818,000) Nave $ 34,000 60,500 119,750 75,500 118,000 $ 407,750 $ (53,250) (70,500) (50,000) (30,000) (204,000) $(119,750) 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. Prepare the following: 1. Malone's entries to record the Nave acquisition. 2. Consolidation entries necessary to prepare the worksheet for part 3. 3. A post acquisition consolidation worksheet as of June 30. Malone's column in the consolidation worksheet should reflect post combination balances. On June 30, Malone Music Company exchanges 17,098 shares of its common stock for 100% of the outstanding shares of Nave Sound, Inc. Malone will maintain Nave as a wholly owned subsidiary, and Nave will retain its own legal and accounting status. Each of Malone'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 Nave's fair value. Malone also paid $26,700 in stock registration and issuance costs in connection with the merger. Just prior to the acquisition, the following data for Nave was available: Book Values Fair Values Receivables $ 60,500 $ 55,800 Trademarks 119,750 318,500 Licensed Song Lyrics 75,500 198,500 In-process Music Videos 0 213,000 Notes payable (70,500) (62,650) Malone and Nave had the following account balances just prior to the acquisition: Malone Cash $ 74,250 Receivables 80,750 Trademarks 423,000 Licensed Song Lyrics 854,000 Equipment (net) 386,000 Totals $ 1,818,000 Accounts payable $ (127,000) Notes payable (415,000) Common stock (400,000) Additional paid-in capital (30,000) Retained earnings (846,000) Totals $(1,818,000) Nave $ 34,000 60,500 119,750 75,500 118,000 $ 407,750 $ (53,250) (70,500) (50,000) (30,000) (204,000) $(119,750) 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. Prepare the following: 1. Malone's entries to record the Nave acquisition. 2. Consolidation entries necessary to prepare the worksheet for part 3. 3. A post acquisition consolidation worksheet as of June 30. Malone's column in the consolidation worksheet should reflect post combination balances
