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Kaplan AC 450 Unit 2 Problem 2-28

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Question;Problem 2-28 [LO4, LO5, LO6, LO7, LO8]On January 1, 2013, 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 have fair values that 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 January 1, 2013, 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)Note: Parentheses indicate a credit balance.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. (Input all amounts as positive values.)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. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation entries of 'Investment in On-the-Go, Inc.' in order of (S) Elimination of subsidiary?s stockholders? equity and (A) Allocation of On-the-Go's consideration fair value in excess of book value. Input all amounts as positive values.)

 

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