Question

5c U NION of SaleData's assets and liabilities have been affected? 33. On January 1, New Tune Company exchanges 15,000 shares of its common stock for all of standing shares of On-the-Go, Inc. Each of New Tune's shares has a $4 par value and a $50 tall The fair value of the stock exchanged in the acquisition was considered equal to On-the- New Tune also paid $25,000 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: Receivables Trademarks Record music catalog........... In-process research and development...... Notes payable..... Book Values $ 65,000 95,000 60,000 -0- (50,000) Fair Values $ 63,000 225,000 180,000 200.000 (45,000) Precombination book values for the two companies are as follows: Cash .......... Receivables... Trademarks ....... Record music catalog... Equipment (net)... Totals................ New Tune $ 60,000 150,000 400.000 840,000 320,000 $1.770.000 On-the-Go $ 29,000 65,000 95,000 60,000 105,000 $354.000 (continued)

Answer 1

		Calculation of Goodwill
		Particulars	Fair values
		Cash	$29,000
		Receivables	$63,000
		Trademarks	$225,000
		Record music catalog	$180,000
		Equipment	$105,000
		In process R&D	$200,000
		Account payable	-$34,000
		Notes payable	-$45,000
		Identifiable Net Assets	$723,000
		Consideration paid	$750,000	(15,000*50)
		Goodwill	$27,000	(750,000-723,000)
		Journal entry in consolidated Books
		Account titiles and explantions	Debit	Credit
		Cash	$29,000
		Receivables	$63,000
		Trademarks	$225,000
		Record music catalog	$180,000
		Equipment	$105,000
		In process R&D	$200,000
		Goodwill	$27,000
		Account payable		$34,000
		Notes payable		$45,000
		Common stock		$60,000	(15000*4)
		Additional paid in capital		$690,000	(15000*46)
		(business acquired)
		Additional paid in capital	$25,000
		Cash		$25,000
		(stock issuance cost incurred)
		As per ASC 805, stock issurance cost does not form part of consideration.)