Question

On January 1, NewTune Company exchanges 17,543 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 $33,400 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	$	57,750			$	54,700
Trademarks		109,250				257,000
Record music catalog		81,750				274,500
In-process research and development		0				216,000
Notes payable		(58,000	)			(48,900	)

Precombination book values for the two companies are as follows:

	NewTune				On-the-Go
Cash	$	68,500			$	37,750
Receivables		134,500				57,750
Trademarks		415,000				109,250
Record music catalog		885,000				81,750
Equipment (net)		330,000				112,000
Totals	$	1,833,000			$	398,500
Accounts payable	$	(189,000	)		$	(54,000	)
Notes payable		(431,000	)			(58,000	)
Common stock		(400,000	)			(50,000	)
Additional paid-in capital		(30,000	)			(30,000	)
Retained earnings		(783,000	)			(206,500	)
Totals	$	(1,833,000	)		$	(398,500	)

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.

Answer 1

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х AutoSum - Calibri 11 Α Α΄ Wrap Text General Fill - * Cut EB Copy Paste Format Painter Clipboard B I U Fa Merge & Center % * .00 .00.0 Insert Delete Format Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Font E Alignment Number Cells Editing A1 fox А B D E F G H J K L M 1 LE 2 New Tune Company and On the Go Company 3 $ 8,77,150.00 4 Fair value of consideration transferred 5 (17543 shares @$50)=(A) 6 Fair value of net assets acquired=(B) 7 Cash 8 Receivables 9 Trademarks 10 Record music catalog 11 In Process research & development 12 Equipments 13 Accounts Payable 14 Notes Payable 15 Goodwill=(A)-(B) 16 17 18 General, Journal 19 Cash 20 Receivables 21 Trademark 22 Record music catalog 23 In Process research & development 24 Teruinment + Sheet1 Sheet2 Sheet2 Sheet3 Select destination and press ENTER or choose Paste $ 37,750.00 $ 54,700.00 $ 2,57,000.00 $ 2,74,500.00 $ 2,16,000.00 $ 1,12,000.00 $ -54,000.00 $ -48,900.00 $ $ 8,49,050.00 28,100.00 Credit Journal Entry Debit $ 37,750.00 $ 54,700.00 $ 2,57,000.00 $ 2,74,500.00 $ 2,16,000.00 $ 112 nn nn Average: 387298.9051 Count: 271 Sum: 53059950 OM 100% Type here to search O x ENG 09:22 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х Σ AutoSum και * Cut EB Copy Calibri 11 Α Α΄ 2 Wrap Text General Fill - Paste B I U Fa Merge & Center % 7 * .00 .00.0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font E Alignment Number Cells A1 fox A D E F G H K L M 17 18 Credit 19 20 21 22 23 B С Journal Entry General Journal Debit Cash $ 37,750.00 Receivables $ 54,700.00 Trademark $ 2,57,000.00 Record music catalog $ 2,74,500.00 In Process research & development $ 2,16,000.00 Equipment $ 1,12,000.00 Goodwill $ 28,100.00 To Accounts Payable To Notes Payable To Common Stock(17543 shares @$4) To Paid in Capital-Excess of par(17543 shares @$46) 24 25 26 27 $ $ $ 54,000.00 48,900.00 70,172.00 28 $ 8,06,978.00 29 30 31 32 33 $ 33,400.00 Additional Paid in capital To Cash (Registeration and issue cost) $ 33,400.00 34 35 36 Assets 37 Cash 38 Receivables 39 Trademarks ► Sheet1 Sheet2 Ready PE Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 72,850.00 Accounts Payable $ 1,89,200.00 Notes Payable $ 6.72.000.00 Common Stock Amount $ 2,43,000.00 $ 4,79,900.00 $ 4.70.172.00 Sheet3 Average: 387298.9051 Count: 271 Sum: 53059950 BO 100% Type here to search O x ENG 09:23 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х Σ AutoSum και * Cut EB Copy Calibri 11 Α Α΄ 2 Wrap Text General Fill - Paste B I U U- Fa Merge & Center % 7 * .00 .00.0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table - Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Cells A1 fox A B E F G H 1 1 K M 35 С D Post Combination Balance Sheet Amount Liabilities and Owner's Equity $ 72,850.00 Accounts Payable $ 1,89,200.00 Notes Payable $ 6,72,000.00 Common Stock $ 11,59,500.00 Paid in Capital excess of par $ 2,16,000.00 Retained Earnings $ 4,42,000.00 $ 28,100.00 $ 27,79,650.00 Total Amount $ 2,43,000.00 $ 4,79,900.00 $ 4,70,172.00 $ 8,03,578.00 $ 7,83,000.00 $ 27,79,650.00 36 Assets 37 Cash 38 Receivables 39 Trademarks 40 Record music catalog 41 In Process research & development 42 Equipment 43 Goodwill 44 Total 45 46 Working 47 48 Cash 49 New Tune 50 On the GO 51 Less: Registeration and issue expenses 52 Cash balance 53 54 Receivables 55 New Tune 56 On the GO 57 Receivable balance 58 KM Sheet1 Sheet2 Sheet3 Ready MI $ 68,500.00 $ 37,750.00 $ -33,400.00 $ 72,850.00 $ 1,34,500.00 $ 54,700.00 $ 1,89,200.00 Average: 387298.9051 Count: 271 Sum: 53059950 O" 100% + Type here to search O x ENG 09:23 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х AutoSum - Calibri 11 Α Α΄ Wrap Text General Fill - * Cut EB Copy Paste Format Painter Clipboard B I U a: Merge & Center % 1 .00 .00.0 Insert Delete Format Conditional Format Cell Formatting as Table - Styles Styles 2 Clear Sort & Find & Filter - Select Editing Font E Alignment Number Cells A1 fox A C D E F G H K M 59 60 B Trademark New Tune On the GO Trademark balance 61 $ 4,15,000.00 $ 2,57,000.00 $ 6,72,000.00 62 63 64 65 Record Music catalog New Tune On the GO Record Music Catalog balance 66 $ 8,85,000.00 $ 2,74,500.00 $ 11,59,500.00 67 68 69 70 In Process Research & Development On the GO In Process Research & Development balance $ 2,16,000.00 $ 2,16,000.00 71 72 73 74 75 76 Equipment New Tune On the GO Equipment balance $ 3,30,000.00 $ 1,12,000.00 $ 4,42,000.00 77 78 Goodwill 79 On the GO Goodwill Balance $ $ 28,100.00 28,100.00 80 81 82 KI Sheet1 Ready ME Accounts Payable Sheet2 Sheet3 Average: 387298.9051 Count: 271 Sum: 53059950 BO 100% + Type here to search O x ENG 09:23 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х AutoSum - * Cut EB Copy Calibri 11 Α Α΄ 2 Wrap Text General Fill - Paste B I U a: Merge & Center % 1 .00 .00.0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table - Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font E Alignment Number Cells C D E F G H K M $ 1,89,000.00 $ 54,000.00 $ 2,43,000.00 $ 4,31,000.00 $ 48,900.00 $ 4,79,900.00 A1 fox A B 82 Accounts Payable 83 New Tune 84 On the GO 85 Accounts Payable balance 86 87 Notes Payable 88 New Tune 89 On the GO 90 Notes Payable balance 91 92 Common Stock 93 New Tune 94 On the GO 95 Common Stock balance 96 97 Additional Paid in capital 98 New Tune 99 On the GO 100 Less: Registeration and Issue cost 101 Additional Paid in capital balance 1021 103 Retained Earnings 104 New Tune 1051 Sheet1 Sheet2 Sheet3 Ready MI $ 4,00,000.00 $ 70,172.00 $ 4,70,172.00 E $ 30,000.00 $ 8,06,978.00 $ -33,400.00 $ 8,03,578.00 $ 7,83,000.00 Average: 387298.9051 Count: 271 Sum: 53059950 BO 100% + Type here to search O x ENG 09:23 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х AutoSum - * Cut EB Copy Calibri 11 Α Α΄ Wrap Text General Fill - Paste B I U U- 3 Merge & Center - - % 7 * .00 .00.0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Cells A1 fox A B C E F G H K L M D Consolidated Worksheet 108 109 Consolidated entries Consolidated Total 110 New Tune On the Go Dr Cr $ 35,100.00 $ $ 1,34,500.00 $ $ 8,77,150.00 37,750.00 57,750.00 $ 4,15,000.00 $ $ 8,85,000.00 $ 111 1121 Cash 113 Accounts Receivable 1141 Investment in On the GO 1151 116 Trademarks 1171 Record Music Catalog 118 In Process research & Development 119 Equipment(Net) 120 Goodwill 121 Total Assets 122 123 Liabilities 124 Accounts Payable 125 Notes Payable 126 Common Stock 127 Additional Paid in capital 128 Retained Earnings 129 Total Liabilities & Equity 1001 K+ Sheet1 Sheet2 Sheet3 Ready 1,09,250.00 $ 1,47,750.00 81,750.00 $ 1,92,750.00 $ 2,16,000.00 1,12,000.00 $ 28,100.00 3,98,500.00 $ 72,850.00 $ 3,050.00 $ 1,89,200.00 $ 5,90,650.00 $ 2,86,500.00 $ 2,86,500.00 $ -2,86,500.00 $ 6,72,000.00 $ 11,59,500.00 $ 2,16,000.00 $ 4,42,000.00 $ 28,100.00 $ 27,79,650.00 $ 3,30,000.00 $ $ 26,76,750.00 $ $ 1,89,000.00 $ $ 4,31,000.00 $ $ 4,70,172.00 $ $ 8,03,578.00 $ $ 7,83,000.00 $ $ 26,76,750.00 $ 54,000.00 58,000.00 $ 9,100.00 50,000.00 $ 50,000.00 30,000.00 $ 30,000.00 2,06,500.00 $ 2,06,500.00 $ 3,98,500.00 $ 2,43,000.00 $ 4,79,900.00 $ 4,70,172.00 $ 8,03,578.00 $ 7,83,000.00 $ 27,79,650.00 IIII Average: 387298.9051 Count: 271 Sum: 53059950 BE OM 100% Type here to search O x ENG 09:24 17-09-2020 D

Book1 - Microsoft Excel Cla Home Insert Page Layout Formulas Data Review View Developer (?) X х Σ AutoSum και * Cut EB Copy Calibri 11 Α Α΄ Wrap Text General Fill - Paste B I U a: Merge & Center % 1 .00 .00.0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Editing Clipboard Font E Alignment Number Cells A1 foc A B C D E F G H K L M 131 132 $ 3,050.00 $ 1,47,750.00 133 Working Accounts Receivable decreased by ($57750- $54700)= Trademark Increased by(257000-$109250)= Record Music Catalog increased by($274500- $81750)= In Process Research and development increased by= 134 $ 1,92,750.00 135 $ 2,16,000.00 1361 137 Notes Payable decreased by($58000-$48900)= $ Goodwill $ 9,100.00 28,100.00 $ 5,90,650.00 Total=($147750+$192750+216000+$9100+$2810 138 0-$3050) 139 Cash New Tune =$68500-$33400(Stock registeration and Issue cost) 140 141 Common Stock 142 Additional Paid In Capital 143 Retained Earnings 144 Total 145 1461 KI Sheet1 Sheet2 Sheet3 Ready MI $ 35,100.00 $ 50,000.00 $ 30,000.00 $ 2,06,500.00 $ 2,86,500.00 Average: 387298.9051 Count: 271 Sum: 53059950 BO 100% Type here to search O x ENG 09:24 17-09-2020 D