On January 1, NewTune Company exchanges 18,100 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 $33,500 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): Receivables Trademarks Record music catalog In-process research and development Notes payable Cash Receivables Trademarks Record music catalog Equipment (net) Precombination book values for the two companies are as follows: NewTune On-the-Go 70,750 $ 40,500 30,250 Total Assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities Book Values Fair Values $ 68,750 $ 66,000 113,250 282,000 68,750 227,000 0 271,500 (72,250) (65,700) Required A Required B 68,750 486,000 113,250 853,000 68,750 413,000 110,000 $ 1,853,000 $ 401,250 $ (177,000) $ (56,000) (379,000) (72,250) (400,000) (50,000) (30,000) (30,000) (867,000) (193,000) $(1,853,000) $(401,250) 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. 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. Complete this question by entering your answers in the tabs below.
On January 1, NewTune Company exchanges 18,100 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 $33,500 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): Receivables Trademarks Record music catalog In-process research and development Notes payable Cash Receivables Trademarks Record music catalog Equipment (net) Precombination book values for the two companies are as follows: NewTune On-the-Go 70,750 $ 40,500 30,250 Total Assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equities Book Values Fair Values $ 68,750 $ 66,000 113,250 282,000 68,750 227,000 0 271,500 (72,250) (65,700) Required A Required B 68,750 486,000 113,250 853,000 68,750 413,000 110,000 $ 1,853,000 $ 401,250 $ (177,000) $ (56,000) (379,000) (72,250) (400,000) (50,000) (30,000) (30,000) (867,000) (193,000) $(1,853,000) $(401,250) 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. 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. Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
K 6
Transcribed Image Text:On January 1, NewTune Company exchanges 18,100 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 $33,500 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):
Receivables
Trademarks
Record music catalog
In-process research and development
Notes payable
Cash
Receivables
Trademarks
Record music catalog
Equipment (net)
Total Assets
Accounts payable
Notes payable
Common stock
Precombination book values for the two companies are as follows:
Additional paid-in capital
Retained earnings
Total liabilities and equities
Book
Values
Fair
Values
$ 68,750 $ 66,000
113,250 282,000
68,750
227,000
$
Required A
0 271,500
(72,250) (65,700)
Required B
NewTune On-the-Go
70,750 $40,500
30,250
68,750
486,000 113,250
853,000
68,750
413,000
110,000
$ 1,853,000 $ 401,250
$ (177,000) $ (56,000)
(379,000) (72,250)
(400,000) (50,000)
(30,000) (30,000)
(867,000) (193,000)
$(1,853,000) $(401,250)
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.
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.
Complete this question by entering your answers in the tabs below.
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