On January 1, NewTune Company exchanges 15,000 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 $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 (credit balances in parentheses): Book Values Fair Values Receivables $ 65,000 $ 63,000 Trademarks 95,000 225,000 Record music catalog 60,000 180,000 In-process research and development –0– 200,000 Notes payable (50,000) (45,000) Precombination book values for the two companies are as follows: NewTune On-the-Go Cash $ 60,000 $ 29,000 Receivables 150,000 65,000 Trademarks 400,000 95,000 Record music catalog 840,000 60,000 Equipment (net) 320,000 105,000 Totals $ 1,770,000 $ 354,000 Accounts payable $ (110,000) $ (34,000) Notes payable (370,000) (50,000) Common stock (400,000) (50,000) Additional paid-in capital (30,000) (30,000) Retained earnings (860,000) (190,000) Totals $(1,770,000) $(354,000) 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.
On January 1, NewTune Company exchanges 15,000 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 $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 (credit balances in parentheses):
|
|
Book Values |
Fair Values |
|---|---|---|
|
Receivables |
$ 65,000 |
$ 63,000 |
|
Trademarks |
95,000 |
225,000 |
|
Record music catalog |
60,000 |
180,000 |
|
In-process research and development |
–0– |
200,000 |
|
Notes payable |
(50,000) |
(45,000) |
Precombination book values for the two companies are as follows:
|
|
NewTune |
On-the-Go |
|---|---|---|
|
Cash |
$ 60,000 |
$ 29,000 |
|
Receivables |
150,000 |
65,000 |
|
Trademarks |
400,000 |
95,000 |
|
Record music catalog |
840,000 |
60,000 |
|
Equipment (net) |
320,000 |
105,000 |
|
Totals |
$ 1,770,000 |
$ 354,000 |
|
Accounts payable |
$ (110,000) |
$ (34,000) |
|
Notes payable |
(370,000) |
(50,000) |
|
Common stock |
(400,000) |
(50,000) |
|
Additional paid-in capital |
(30,000) |
(30,000) |
|
|
(860,000) |
(190,000) |
|
Totals |
$(1,770,000) |
$(354,000) |
-
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.
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