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On January 1, NewTune Company exchanges 18,688 shares of its common stock for all of the...

On January 1, NewTune Company exchanges 18,688 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 $35,250 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:

Book Values Fair Values
Receivables $ 51,750 $ 49,150
Trademarks 96,000 267,750
Record music catalog 84,500 240,500
In-process research and development 0 265,500
Notes payable (72,000 ) (63,750 )

Precombination book values for the two companies are as follows:

NewTune On-the-Go
Cash $ 70,000 $ 41,000
Receivables 140,000 51,750
Trademarks 418,000 96,000
Record music catalog 931,000 84,500
Equipment (net) 333,000 138,000
Totals $ 1,892,000 $ 411,250
Accounts payable $ (113,000 ) $ (38,250 )
Notes payable (467,000 ) (72,000 )
Common stock (400,000 ) (50,000 )
Additional paid-in capital (30,000 ) (30,000 )
Retained earnings (882,000 ) (221,000 )
Totals $ (1,892,000 ) $ (411,250 )
  1. 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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