Registration and issuance costs in connection

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Reference no: EM13922146

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On January 1, 2015, New Tune Company exchanges 16,888 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of New Tune'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. New Tune also paid $38,600 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

$

29,250

 

$

22,900

 

  Trademarks

 

106,500

 

 

282,000

 

  Record music catalog

 

67,000

 

 

190,000

 

  In-process research and development

 

0

 

 

221,250

 

  Notes payable

 

(62,500

)

 

(54,500

)

 

Recombination January 1, 2015, book values for the two companies are as follows:

 

     New Tune

 

 

On-the-Go

  Cash

$

64,000

 

 

$

45,000

 

  Receivables

 

117,000

 

 

 

29,250

 

  Trademarks

 

494,000

 

 

 

106,500

 

  Record music catalog

 

868,000

 

 

 

67,000

 

  Equipment (net)

 

402,000

 

 

 

150,000

 

 

 

 

 

 

 

 

 

  Totals

$

1,945,000

 

 

$

397,750

 

 

 

 

 

 

 

 

 

  Accounts payable

$

(158,000

)

 

$

(44,750

)

  Notes payable

 

(450,000

)

 

 

(62,500

)

  Common stock

 

(400,000

)

 

 

(50,000

)

  Additional paid-in capital

 

(30,000

)

 

 

(30,000

)

  Retained earnings

 

(907,000

)

 

 

(210,500

)

 

 

 

 

 

 

 

 

  Totals

$

(1,945,000

)

 

$

(397,750

)

Total common stock is $467,552

Additional paid-in capital is $776,848 as per calculation from the acquisition and $38,600 for stock issuance should be included.

 

 

 

 

 

 

 

 

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 New Tune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a post combination balance sheet for New Tune as of the acquisition 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. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

 

 

Reference no: EM13922146

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