| On January 1, NewTune Company exchanges 17,360 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTunes 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-Gos fair value. NewTune also paid $44,650 in stock registration and issuance costs in connection with the merger. Several of On-the-Gos accounts fair values differ from their book values on this date (credit balances in parentheses): | | Book Values | Fair Values | | Receivables | $ | 44,250 | | $ | 41,300 | | | Trademarks | | 117,250 | | | 277,750 | | | Record music catalog | | 66,000 | | | 186,750 | | | In-process research and development | | 0 | | | 261,000 | | | Notes payable | | (54,750) | | | (48,350) | | | | Precombination book values for the two companies are as follows: | | NewTune | On-the-Go | | Cash | $ | 62,000 | | $ | 50,250 | | | Receivables | | 125,000 | | | 44,250 | | | Trademarks | | 441,000 | | | 117,250 | | | Record music catalog | | 873,000 | | | 66,000 | | | Equipment (net) | | 344,000 | | | 108,000 | | | Total Assets | $ | 1,845,000 | | $ | 385,750 | | | Accounts payable | $ | (150,000) | | $ | (43,500) | | | Notes payable | | (378,000) | | | (54,750) | | | Common stock | | (400,000) | | | (50,000) | | | Additional paid-in capital | | (30,000) | | | (30,000) | | | Retained earnings | | (887,000) | | | (207,500) | | | Total liabilities and equities | $ | (1,845,000) | | $ | (385,750) | | | | - Assume that this combination is a statutory merger so that On-the-Gos 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 post combination 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
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