On January 1, 2013, NewTune Company exchanges 16,705 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 $24,100 in stock registration and issuance costs in connection with the merger.

On January 1, 2013, NewTune Company exchanges 16,705 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 $24,100 in stock registration and issuance costs in connection with the merger.

Several of On-the-Go’s accounts have fair values that differ from their book values on this date:

 

	Book          Values			Fair        Values
Receivables	$	64,250		$	57,700
Trademarks		102,000			235,500
Record music catalog		65,750			247,250
In-process research and development		0			216,000
Notes payable		(59,750	)		(53,550	)

 

Precombination January 1, 2013, book values for the two companies are as follows:

 

	NewTune				On-the-Go
Cash	$	64,750			$	31,500
Receivables		76,250				64,250
Trademarks		470,000				102,000
Record music catalog		896,000				65,750
Equipment (net)		413,000				106,000
Totals	$	1,920,000			$	369,500
Accounts payable	$	(154,000	)		$	(34,750	)
Notes payable		(427,000	)			(59,750	)
Common stock		(400,000	)			(50,000	)
Additional paid-in capital		(30,000	)			(30,000	)
Retained earnings		(909,000	)			(195,000	)
Totals	$	(1,920,000	)		$	(369,500	)

Note: Parentheses indicate a credit balance.

a.

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. (Input all amounts as positive values.)

   

b.

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. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation entries of 'Investment in On-the-Go, Inc.' in order of (S) Elimination of subsidiary’s stockholders’ equity and (A) Allocation of On-the-Go's consideration fair value in excess of book value. Input all amounts as positive values.)

 

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