Maurice Tutor
$15/per page/Negotiable
On January 1, 2013, 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 have fair values that differ from their book values on this date:
|
  Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
Book Values $ 65,000 |
Fair Values $ 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 January 1, 2013, book values for the two companies are as follows:
|
  Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
NewTune $ 60,000 |
 |
On-the-Go $ 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) |
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 acquisi- tion 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.
c. How do the balance sheet accounts compare across parts ( a ) and ( b )?