On June 30, Malone Music Company exchanges 17,098 shares of its common stock for 100% of the outstanding shares of Nave Sound, Inc. Malone will maintain Nave as a wholly owned subsidiary, and Nave will retain its own legal and accounting status. Each of Malone’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 Nave’s fair value. Malone also paid $26,700 in stock registration and issuance costs in connection with the merger. Just prior to the acquisition, the following data for Nave was available: Book Values Fair Values Receivables $ 60,500 $ 55,800 Trademarks 119,750 318,500 Licensed Song Lyrics 75,500 198,500 In-process Music Videos 0 213,000 Notes payable (70,500) (62,650) Malone and Nave had the following account balances just prior to the acquisition: Malone Nave Cash $ 74,250 $ 34,000 Receivables 80,750 60,500 Trademarks 423,000 119,750 Licensed Song Lyrics 854,000 75,500 Equipment (net) 386,000 118,000 Totals $ 1,818,000 $ 407,750 Accounts payable $ (127,000) $ (53,250) Notes payable (415,000) (70,500) Common stock (400,000) (50,000) Additional paid-in capital (30,000) (30,000) Retained earnings (846,000) (204,000) Totals $(1,818,000) $(119,750) 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. Prepare the following: 1. Malone’s entries to record the Nave acquisition. 2. Consolidation entries necessary to prepare the worksheet for part 3. 3. A post acquisition consolidation worksheet as of June 30. Malone’s column in the consolidation worksheet should reflect post combination balances.
On June 30, Malone Music Company exchanges 17,098 shares of its common stock for 100% of the outstanding
shares of Nave Sound, Inc. Malone will maintain Nave as a wholly owned subsidiary, and Nave will retain its own
legal and accounting status. Each of Malone’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 Nave’s fair value. Malone also paid $26,700 in stock
registration and issuance costs in connection with the merger.
Just prior to the acquisition, the following data for Nave was available:
Book Values Fair Values
Receivables $ 60,500 $ 55,800
Trademarks 119,750 318,500
Licensed Song Lyrics 75,500 198,500
In-process Music Videos 0 213,000
Notes payable (70,500) (62,650)
Malone and Nave had the following account balances just prior to the acquisition:
Malone Nave
Cash $ 74,250 $ 34,000
Receivables 80,750 60,500
Trademarks 423,000 119,750
Licensed Song Lyrics 854,000 75,500
Equipment (net) 386,000 118,000
Totals $ 1,818,000 $ 407,750
Accounts payable $ (127,000) $ (53,250)
Notes payable (415,000) (70,500)
Common stock (400,000) (50,000)
Additional paid-in capital (30,000) (30,000)
Totals $(1,818,000) $(119,750)
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.
Prepare the following:
1. Malone’s entries to record the Nave acquisition.
2. Consolidation entries necessary to prepare the worksheet for part 3.
3. A post acquisition consolidation worksheet as of June 30. Malone’s column in the consolidation
worksheet should reflect post combination balances.
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