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On January 1, 2015, NewTune Company exchanges 16,167 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTunes shares has a $10 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 $31,400 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:

	Book Values		Fair Values
Receivables	$50,750		$44,200
Trademarks	104,250		250,500
Record music catalog	75,000		201,750
In-process research and development	0		225,000
Notes payable	68,250		62,750

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

	NewTune		On-the-Go
Cash	$63,000		$38,500
Receivables	126,000		50,750
Trademarks	459,000		104,250
Record music catalog	841,000		75,000
Equipment (net)	389,000		133,000
Totals	$1,878,000		$401,500
Accounts payable	$129,000		$52,750
Notes payable	370,000		68,250
Common stock	400,000		50,000
Additional paid-in capital	30,000		30,000
Retained earnings	949,000		200,500
Totals	$1,878,000		$401,500

Part 1:

(a)

Assuming that NewTune uses the purchase method to account for the acquisition of On-The-Go Company, prepare the journal entries necessary to record the Investment in On-The-Go on the date of acquisition. - Record the acquisition of the On-The-Go Company stock. - Record the payment of the stock issuance costs. - Record the legal fees related to the acquisition. (b) Assuming that the Board of Directors of NewTune votes to dissolve On-The-Go Company on February 1, 2015, prepare the journal entries necessary to this dissolution. - Record the dissolution of On-The-Go Company. (c) Assuming that no dissolution takes place in connection with this combination, rather, both companies retain their separate legal indentities. Prepare a worksheet to consolidate the two companies as of the combination date.

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