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Kaplan AC 450 Advanced Accounting Unit 2 Problem 2-28




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;Trademarks96,000267,750;Record music catalog84,500240,500;In-process research and development0265,500;Notes payable(72,000)(63,750);Precombination January 1, 2013, book values for the two companies are as follows;NewTuneOn-the-Go;Cash$70,000$41,000;Receivables140,00051,750;Trademarks418,00096,000;Record music catalog931,00084,500;Equipment (net)333,000138,000;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.)


Paper#80057 | Written in 18-Jul-2015

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