Question

On January 1, NewTune Company exchanges 17,049 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 $37,300 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	$	77,500			$	72,400
Trademarks		108,000				238,500
Record music catalog		75,500				197,750
In-process research and development		0				262,500
Notes payable		(68,500	)			(60,400	)

Precombination book values for the two companies are as follows:

	NewTune				On-the-Go
Cash	$	73,250			$	44,000
Receivables		152,750				77,500
Trademarks		462,000				108,000
Record music catalog		875,000				75,500
Equipment (net)		360,000				117,000
Totals	$	1,923,000			$	422,000
Accounts payable	$	(172,000	)		$	(53,000	)
Notes payable		(462,000	)			(68,500	)
Common stock		(400,000	)			(50,000	)
Additional paid-in capital		(30,000	)			(30,000	)
Retained earnings		(859,000	)			(220,500	)
Totals	$	(1,923,000	)		$	(108,000	)

1. 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.
2. 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.

	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 $ Total liabilities and equities $

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 $ $ $ Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities $ $ $ $ $

Answer 1

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font 9-% , od 193 comastiongl a Stanle styles Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format sen calle Fill 2 Clear 2 Sort & Find & Filter Select Editing Alignment Number Cells A1 ДА | 8,52,450.00 Fair value of consideration transferred (17049 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) $ 44,000.00 $ 72,400.00 $ 2,38,500.00 $ 1,97,750.00 $ 2,62,500.00 $ 1,17,000.00 $ -53,000.00 $ -60,400.00 $ 13 8,18,750.00 33,700.00 14 15 18 Journal Entry 17 Cash Receivables Trademark Record music catalog In Process research & development Equipment Goodwill To Accounts Payable Sheet1 Sheet2 Sheet3 Select destination and press ENTER or choose Paste $ 44,000.00 $ 72,400.00 $ 2,38,500.00 $ 1,97,750.00 $ 2,62,500.00 $ 1,17,000.00 $ 33,700.00 24 53,000.00 Average: 395184.6715 Count: 268 Sum: 54140300 D 100% 0 O AN 11:02 ENG 29-01-2020 W O

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells E F G H I J K L A1 - fe ГДА | 16 Journal Entry 17 (1) Cash 18 Receivables Trademark Record music catalog In Process research & development Equipment Goodwill To Accounts Payable To Notes Payable To Common Stock(17049 shares @$4) To Paid in Capital-Excess of par(17049 shares @$46) $ 44,000.00 $ 72,400.00 $ 2,38,500.00 $ 1,97,750.00 $ 2,62,500.00 $ 1,17,000.00 $ 33,700.00 53,000.00 60,400.00 68,196.00 7,84,254.00 27 12) $ 37,300.00 Additional Paid in capital To Cash (Registeration and issue cost) 37,300.00 Assets Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 79,950.00 Accounts Payable $ 2,25,150.00 Notes Payable $ 7,00,500.00 Common Stock $ 10,72,750.00 Paid in Capital excess of par $ 2,62,500.00 Retained Earnings Cash Receivables Trademarks Record music catalog In Process research & development Sheet1 Sheet2 Sheet3 Circular References Amount $ 2,25,000.00 $ 5,22,400.00 $ 4,68,196.00 $ 7,76,954.00 $ 8,59,000.00 | 38 39 ► Ready Average: 395184.6715 Count: 268 Sum: 54140300 B + OU 100% - OENG 0 11:03 29-01-2020 SA A 0

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells A1 ГДА E F G H I J K L 34 Assets Cash Receivables Trademarks Record music catalog In Process research & development Equipment Goodwill Total C D Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 79,950.00 Accounts Payable $ 2,25,150.00 Notes Payable $ 7,00,500.00 Common Stock $ 10,72,750.00 Paid in Capital excess of par $ 2,62,500.00 Retained Earnings $ 4,77,000.00 $ 33,700.00 $ 28,51,550.00 Total Amount $ 2,25,000.00 $ 5,22,400.00 $ 4,68,196.00 $ 7,76,954.00 $ 8,59,000.00 $ 28,51,550.00 Working Cash New Tune On the GO Less: Registeration and issue expenses Cash balance $ $ $ $ 73,250.00 44,000.00 -37,300.00 79,950.00 Receivables New Tune On the GO Receivable balance $ 1,52,750.00 $ 72,400.00 $ 2,25,150.00 55 56 Sheet30 Ke Ready Sheet1 Sheet2 Circular References Average: 395184.6715 Count: 268 Sum: 54140300 D O + 100% - OENG 0 11:03 29-01-2020 SA A 0 W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells A1 A 2 E F G H I J K L Trademark New Tune On the GO Trademark balance $ 4,62,000.00 $ 2,67,750.00 $ 7,29,750.00 Record Music catalog New Tune On the GO Record Music Catalog balance $ 8,75,000.00 $ 2,40,500.00 $ 11,15,500.00 In Process Research & Development On the GO In Process Research & Development balance $ 2,62,500.00 $ 2,62,500.00 Equipment New Tune On the GO Equipment balance $ 3,60,000.00 $ 1,17,000.00 $ 4,77,000.00 Goodwill On the GO Goodwill Balance $ $ 33,700.00 33,700.00 80 Ke Ready Accounts Payable Sheet30 Sheet1 Sheet2 Circular References Average: 395184.6715 Count: 268 Sum: 54140300 D gl O ^ 100% ve ENG 0 11:03 + . 29-01-2020

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells A1 A 2 80 81 82 83 84 Accounts Payable New Tune On the GO Accounts Payable balance $ 1,72,000.00 $ 53,000.00 $ 2,25,000.00 86 Notes Payable New Tune On the GO Notes Payable balance $ 4,62,000.00 $ 60,400.00 $ 5,22,400.00 Common Stock New Tune On the GO Common Stock balance $ 4,00,000.00 $ 68,196.00 $ 4,68,196.00 Additional Paid in capital New Tune On the GO Less: Registeration and Issue cost Additional Paid in capital balance $ 30,000.00 $ 7,84,254.00 $ -37,300.00 $ 7,76,954.00 98 99 100 Retained Earnings New Tune $ 8,59,000.00 101 102 103 Ke Ready Sheet30 Sheet1 Sheet2 Circular References Average: 395184.6715 Count: 268 Sum: 54140300 D gl O ^ 100% ve ENG 0 11:03 29-01-2020

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 - AA BI U - ->-A Font Paste Format Painter Clipboard Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells - A1 A E F G H I J K L 2 105 106 New Tune Company and on the Go Company Consolidated Worksheet 107 Consolidated entries Consolidated Total 108 New Tune On the Go Cash Accounts Receivable Investment in On the GO $ 35,950.00 $ 1,52,750.00 $ 8,52,450.00 $ $ 44,000.00 77,500.00 $ 5,100.00 $ 5,51,950.00 $ 3,00,500.00 $ 4,62,000.00 $ 8,75,000.00 $ $ 1,08,000.00 75,500.00 $ 1,30,500.00 $ 1,22,250.00 $ 2,62,500.00 Trademarks Record Music Catalog In Process research & Development Equipment(Net) Goodwill Total Assets $ 79,950.00 $ 2,25,150.00 $ 3,00,500.00 $ -3,00,500.00 $ 7,00,500.00 $ 10,72,750.00 $ 2,62,500.00 $ 4,77,000.00 $ 33,700.00 $ 28,51,550.00 $ 3,60,000.00 $ 1,17,000.00 $ 33,700.00 $ 27,38,150.00 $ 4,22,000.00 123 124 Liabilities Accounts Payable Notes Payable Common Stock Additional Paid in capital Retained Earnings Sheet1 Sheet2 Sheet30 Circular References $ 1,72,000.00 $ $ 4,62,000.00 $ $ 4,68,196.00 $ $ 7,76,954.00 $ $ 8,59,000.00 $ 53,000.00 68,500.00 50,000.00 30,000.00 2,20,500.00 $ 8,100.00 $ 50,000.00 $ 30,000.00 $ 2,20,500.00 $ $ $ $ $ $ 2,25,000.00 5,22,400.00 4,68,196.00 7,76,954.00 8,59,000.00 125 126 - LILIA::-- Ke Ready Average: 395184.6715 Count: 268 Sum: 54140300 D O 100% ve OENG 0 11:03 29-01-2020 + . SA A W

Book1 - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 Autosum * LE Paste Format Painter Clipboard Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells A10 ΓΔ Α 107 C D E Consolidated entries F G H I J K L Consolidated Total 108 New Tune On the Go Dr Cr 109 Cash Accounts Receivable Investment in On the GO 111 112 $ 35,950.00 $ $ 1,52,750.00 $ $ 8,52,450.00 44,000.00 77,500.00 $ 4,62,000.00 $ 8,75,000.00 $ $ 1,08,000.00 75,500.00 $ 1,30,500.00 $ 1,22,250.00 $ 2,62,500.00 $ $ 5,100.00 $ $ 5,51,950.00 $ $ 3,00,500.00 $ $ $ $ $ $ $ Trademarks Record Music Catalog In Process research & Development Equipment(Net) Goodwill Total Assets 79,950.00 2,25,150.00 3,00,500.00 -3,00,500.00 7,00,500.00 10,72,750.00 2,62,500.00 4,77,000.00 33,700.00 28,51,550.00 116 $ 3,60,000.00 $ 1,17,000.00 $ 33,700.00 119 $ 27,38,150.00 $ 4,22,000.00 120 Liabilities Accounts Payable Notes Payable Common Stock Additional Paid in capital Retained Earnings Total Liabilities & Equity 125 $ 1,72,000.00 $ 4,62,000.00 $ 4,68,196.00 $ 7,76,954.00 $ 8,59,000.00 $ 27,38,150.00 $ $ $ $ $ $ 53,000.00 68,500.00 $ 8,100.00 50,000.00 $ 50,000.00 30,000.00 $ 30,000.00 2,20,500.00 $ 2,20,500.00 4,22,000.00 $ $ $ $ $ $ 2,25,000.00 5,22,400.00 4,68,196.00 7,76,954.00 8,59,000.00 28,51,550.00 $ - 127 128 129 Sheet30 Ke Ready Sheet1 Sheet2 Circular References Average: 395184.6715 Count: 268 Sum: 54140300 D O 100% 0 ve 11:03 PANO ENG 2014 29-01-2020 + .