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 (credit balances in parentheses): 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 Total Assets $ 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 ) Total liabilities and equities $ (1,923,000 ) $ (422,000 ) 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.
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 (credit balances in parentheses): 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 Total Assets $ 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 ) Total liabilities and equities $ (1,923,000 ) $ (422,000 ) 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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 (credit balances in parentheses):
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 | ||||
Total Assets | $ | 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 | ) | ||
(859,000 | ) | (220,500 | ) | |||
Total liabilities and equities | $ | (1,923,000 | ) | $ | (422,000 | ) |
- 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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education