Question

On January 1, NewTune Company exchanges 16,921 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 $28,900 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:

	Book Values				Fair Values
Receivables	$	56,750			$	50,250
Trademarks		116,250				276,000
Record music catalog		65,500				243,250
In-process research and development		0				201,750
Notes payable		(74,000	)			(64,800	)

Precombination book values for the two companies are as follows:

	NewTune				On-the-Go
Cash	$	68,750			$	37,250
Receivables		147,250				56,750
Trademarks		452,000				116,250
Record music catalog		878,000				65,500
Equipment (net)		354,000				122,000
Totals	$	1,900,000			$	397,750
Accounts payable	$	(111,000	)		$	(49,750	)
Notes payable		(418,000	)			(74,000	)
Common stock		(400,000	)			(50,000	)
Additional paid-in capital		(30,000	)			(30,000	)
Retained earnings		(941,000	)			(194,000	)
Totals	$	(1,900,000	)		$	(116,250	)

Assume that this combination is a statutory merger so that On-the-Go’s 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. (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.)

Answer 1

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center 1 1 - 3 Autosum * Calibri 11 - A A BI U DA Font Paste 9 % 8... Insert Delete Format Conditional Format Formatting as Table Styles Format Painter Clipboard Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K22 А H I J K 8,46,050.00 $ 37,250.00 $ 50,250.00 $ 2,76,000.00 $ 2,43,250.00 $ 2,01,750.00 $ 1,22,000.00 $ 49,750.00 $ -64,800.00 $ Fair value of consideration transferred (16921 shares @$50)=(A) Fair value of net assets acquired=(B) Cash Receivables Trademarks Record music catalog In Process research & development Equipments Accounts Payable Notes Payable Goodwill=(A)-(B) 15 16 Journal Entry 17 1) Cash Receivables Trademark Record music catalog In Process research & development Equipment 23 Goodwill To Accounts Payable Sheet1 Sheet2 Sheet3 0 Select destination and press ENTER or choose Paste 8,15,950.00 30,100.00 $ 37,250.00 $ 50,250.00 $ 2,76,000.00 $ 2,43,250.00 $ 2,01,750.00 $ 1,22,000.00 $ 30,100.00 21 24 49,750.00 OO 100% @ . ENG U 10:46 11-02-2020 SPA 0 W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center 1 1 - 3 Autosum * Calibri 11 - A A BI U DA Font Paste 9 % 8... Insert Delete Format Conditional Format Formatting as Table Styles Format Painter Clipboard Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells - fe K22 А H I J K L 15 16 Journal Entry Cash Receivables Trademark Record music catalog In Process research & development Equipment Goodwill To Accounts Payable To Notes Payable To Common Stock(16921 shares @$4) To Paid in Capital-Excess of par(16921 shares @$46) $ 37,250.00 $ 50,250.00 $ 2,76,000.00 $ 2,43,250.00 $ 2,01,750.00 $ 1,22,000.00 $ 30,100.00 49,750.00 64,800.00 67,684.00 7,78,366.00 $ 28,900.00 Additional Paid in capital To Cash (Registeration and issue cost) 28,900.00 Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 77,100.00 Accounts Payable $ 1,97,500.00 Notes Payable $ 7,28,000.00 Common Stock $ 11,21,250.00 Paid in Capital excess of par Assets Cash Receivables Trademarks Record music catalog S heet1 Sheet2 Sheet3 Circular References Amount $ 1,60,750.00 $ 4,82,800.00 $ 4,67,684.00 $ 7,79,466.00 37 38 H Ready OO 100% @ U A 10:46o 1 ENG 11-02-2020 W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center 1 1 - 3 Autosum * Calibri 11 - A A BI U DA Font Paste 9 % 8... Insert Delete Format Conditional Format Formatting as Table Styles Format Painter Clipboard Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K22 А H I J K Assets Cash Receivables Trademarks Record music catalog In Process research & development Equipment Goodwill Total Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 77,100.00 Accounts Payable $ 1,97,500.00 Notes Payable $ 7,28,000.00 Common Stock $ 11,21,250.00 Paid in Capital excess of par $ 2,01,750.00 Retained Earnings $ 4,76,000.00 $ 30,100.00 $ 28,31,700.00 Total Amount $ 1,60,750.00 $ 4,82,800.00 $ 4,67,684.00 $ 7,79,466.00 $ 9,41,000.00 $ 28,31,700.00 Working Cash New Tune On the GO Less: Registeration and issue expenses Cash balance $ $ $ $ 68,750.00 37,250.00 -28,900.00 77,100.00 Receivables New Tune On the GO(Fair Value) Receivable balance $ 1,47,250.00 $ 50,250.00 $ 1,97,500.00 55 56 Sheet3 0 Sheet1 Sheet2 Circular References Ready OO SA A 100% @ . JENG U 10:46 11-02-2020 0 W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General Calibri 11 - A A BI U DA Font - Wrap Text Merge & Center - 8... D Cell Styles Paste - E Insert Delete Format 9 % E Autosum A7 Fill Z Et Sort & Find & 2 Clear Filter Select Editing Conditional Format Formatting as Table Styles Format Painter Clipboard Alignment Number Cells K22 А H I J K L Trademark New Tune On the GO Trademark balance $ 4,52,000.00 $ 2,76,000.00 $ 7,28,000.00 Record Music catalog New Tune On the GO Record Music Catalog balance $ 8,78,000.00 $ 2,43,250.00 $ 11,21,250.00 In Process Research & Development On the GO In Process Research & Development balance $ 2,01,750.00 $ 2,01,750.00 Equipment New Tune On the GO Equipment balance $ 3,54,000.00 $ 1,22,000.00 $ 4,76,000.00 Goodwill On the GO Goodwill Balance $ $ 30,100.00 30,100.00 80 Ke Ready Accounts Payable Sheet30 Sheet1 Sheet2 Circular References OO OPA 100% @ ve ENG U 10:47 - o 11-02-2020

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General Calibri 11 - A A BI U DA Font - Wrap Text Merge & Center 1 1 - 9-% , 108 from tingla Table - soses Paste 9 % 8... - 3 insert Deuterowe Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Fill 2 Clear Format Painter Clipboard Autosum * 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K22 А B H I J K L Accounts Payable New Tune On the GO Accounts Payable balance $ 1,11,000.00 $ 49,750.00 $ 1,60,750.00 Notes Payable New Tune On the GO Notes Payable balance $ 4,18,000.00 $ 64,800.00 $ 4,82,800.00 Common Stock New Tune On the GO Common Stock balance $ 4,00,000.00 $ 67,684.00 $ 4,67,684.00 Additional Paid in capital New Tune On the GO Less: Registeration and Issue cost Additional Paid in capital balance $ 30,000.00 $ 7,78,366.00 $ -28,900.00 $ 7,79,466.00 Retained Earnings 101 102 $ 9,41,000.00 New Tune Sheet1 Sheet2 Circular References Sheet3 Ready 100% @ U OO OPA ENG 10:47 11-02-2020 W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General Calibri 11 - A A BI U DA Font - Wrap Text Merge & Center 1 1 conditional forte Paste 9.% , - 3 insert Delete Format 9 Autosum * 2 Clear some od 9 % 8... Format Painter Clipboard s Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing time Alignment Number Cells - fe K22 А G H I J K L Retained Earnings New Tune $ 9,41,000.00 104 105 New Tune Company and On the Go Company Consolidated Worksheet 106 107 Consolidated entries Consolidated Total 108 New Tune On the Go 109 Cash Accounts Receivable Investment in On the GO 110 111 112 113 $ 39,850.00 $ 1,47,250.00 $ 8,46,050.00 $ $ 37,250.00 56,750.00 $ 6,500.00 $ 5,72,050.00 $ 2,74,000.00 114 115 $ 4,52,000.00 $ 8,78,000.00 $ $ 1,16,250.00 65,500.00 $ 1,59,750.00 $ 1,77,750.00 $ 2,01,750.00 $ $ $ $ $ $ $ $ $ $ Trademarks Record Music Catalog In Process research & Development Equipment(Net) Goodwill Total Assets 77,100.00 1,97,500.00 2,74,000.00 -2,74,000.00 7,28,000.00 11,21,250.00 2,01,750.00 4,76,000.00 30,100.00 28,31,700.00 116 $ 3,54,000.00 $ 1,22,000.00 $ 30,100.00 $ 27,17,150.00 $ 3,97,750.00 117 118 119 120 121 122 ™ Ready $ 1,11,000.00 $ 49,750.00 $ 1,60,750.00 Liabilities Accounts Payable Sheet1 Sheet2 Sheet3 Circular References K 100% 0 OO SPA 10:47 ENG O 11-02-2020

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center Autosum * Calibri 11 - A A BI U DA Font Paste o no 1 1 a comditional al Table - styles . Insert Delete Format - 3 insert Delete Format and Conditional Format Formatting as Table Styles Cell Styles Format Painter Clipboard 2. clear Fill 2 Clear Sort & Find & Filter Select Editing the fire Alignment Number Cells K22 fic А н т к Cash Accounts Receivable Investment in On the GO $ 39,850.00 $ $ 1,47,250.00 $ $ 8,46,050.00 37,250.00 56,750.00 112 113 $ 4,52,000.00 $ 8,78,000.00 $ $ 1,16,250.00 65,500.00 $ 1,59,750.00 $ 1,77,750.00 $ 2,01,750.00 Trademarks Record Music Catalog In Process research & Development Equipment(Net) Goodwill Total Assets $ 77,100.00 $ 6,500.00 $ 1,97,500.00 $ 5,72,050.00 $ 2,74,000.00 $ 2,74,000.00 $ -2,74,000.00 $ 7,28,000.00 $ 11,21,250.00 $ 2,01,750.00 $ 4,76,000.00 $ 30,100.00 $ 28,31,700.00 $ 3,54,000.00 $ 1,22,000.00 $ 30,100.00 $ 27,17,150.00 $ 3,97,750.00 120 Liabilities Accounts Payable Notes Payable Common Stock Additional Paid in capital Retained Earnings Total Liabilities & Equity $ 1,11,000.00 $ $ 4,18,000.00 $ $ 4,67,684.00 $ $ 7,79,466.00 $ $ 9,41,000.00 $ $ 27,17,150.00 $ 49,750.00 74,000.00 $ 50,000.00 $ 30,000.00 $ 1,94,000.00 $ 3,97,750.00 9,200.00 50,000.00 30,000.00 1,94,000.00 $ $ $ $ $ 1,60,750.00 4,82,800.00 4,67,684.00 7,79,466.00 9,41,000.00 28,31,700.00 $ 128 131 Accounts Receivable decreased by ($56750-$50250) = Trademark Increased by($276000-$116250)= Record Music Catalog increased by($243250-$65500)= Sheet1 Sheet2 Sheet3 Circular References $ 6,500.00 $ 1,59,750.00 $ 1,77,750.00 132 K+ Ready OO SA A 100% @ ve JENG U 10:47 . o 11-02-2020

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center 1 1 - 3 Autosum * Calibri 11 - A A BI U DA Font Paste 9 % 8... Insert Delete Format Conditional Format Formatting as Table Styles Format Painter Clipboard Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K22 for А E F н тук Accounts Payable Notes Payable Common Stock Additional Paid in capital Retained Earnings Total Liabilities & Equity $ 1,11,000.00 $ $ 4,18,000.00 $ $ 4,67,684.00 $ $ 7,79,466.00 $ $ 9,41,000.00 $ $ 27,17,150.00 $ 49,750.00 74,000.00 $ 50,000.00 $ 30,000.00 $ 1,94,000.00 $ 3,97,750.00 9,200.00 50,000.00 30,000.00 1,94,000.00 $ $ $ $ $ $ 1,60,750.00 4,82,800.00 4,67,684.00 7,79,466.00 9,41,000.00 28,31,700.00 $ Accounts Receivable decreased by ($56750-$50250)= $ 6,500.00 Trademark Increased by($276000-$116250)= $ 1,59,750.00 Record Music Catalog increased by($243250-$65500) = $ 1,77,750.00 In Process Research and development increased by= $ 2,62,500.00 Notes Payable decreased by($74000-$64800)= $ 9,200.00 Goodwill $ 30,100.00 Total=($159750+$177750+$262500+$9200+$30100-$6500) $ 6,32,800.00 135 136 137 Cash New Tune =$68750-$28900(Stock registration and Issue cost) 138 140 Common Stock Additional Paid In Capital Retained Earnings Total $ 39,850.00 $ 50,000.00 $ 30,000.00 $ 1,94,000.00 $ 2,74,000.00 141 142 143 Ke Ready Sheet30 Sheet1 Sheet2 Circular References 100% @ OO SA A U 10:47 11-02-2020 JENG 0