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On January 1, NewTune Company exchanges 17,360 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTunes 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-Gos fair value. NewTune also paid $44,650 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 (credit balances in parentheses):

	Book Values			Fair Values
Receivables	$	44,250		$	41,300
Trademarks		117,250			277,750
Record music catalog		66,000			186,750
In-process research and development		0			261,000
Notes payable		(54,750	)		(48,350	)

Precombination book values for the two companies are as follows:

	NewTune			On-the-Go
Cash	$	62,000		$	50,250
Receivables		125,000			44,250
Trademarks		441,000			117,250
Record music catalog		873,000			66,000
Equipment (net)		344,000			108,000
Total Assets	$	1,845,000		$	385,750
Accounts payable	$	(150,000	)	$	(43,500	)
Notes payable		(378,000	)		(54,750	)
Common stock		(400,000	)		(50,000	)
Additional paid-in capital		(30,000	)		(30,000	)
Retained earnings		(887,000	)		(207,500	)
Total liabilities and equities	$	(1,845,000	)	$	(385,750	)

1. Assume that this combination is a statutory merger so that On-the-Gos 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.

NEWTUNE COMPANY AND ON-THE-GO, INC. Post-Combination Balance Sheet January 1, 20XX Assets Liabilities and Equity Cash $67,600 Accounts payable $193,500 Receivables 166,300 Notes payable 426,350 Trademarks 718,750 Common stock 469,440 Record music catalog 1,059,750 Additional paid-in capital 783,910 In-process research and development 261,000 Retained earnings 887,000 Equipment (net) 452,000 Goodwill 34,800 Total assets $2,760,200 Total liabilities and equities $2,760,200

2. 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.

NEWTUNE COMPANY AND ON-THE-GO, INC. Consolidation Worksheet January 1, 20XX Consolidation Entries Accounts Newtune Co On-the-Go, Inc. Debit Credit Consolidated Totals Cash $17,350 $50,250 $67,600 Receivables 125,000 44,250 2,950 166,300 Investment in On-the-Go 868,000 Trademarks 441,000 117,250 160,500 718,750 Record music catalog 873,000 66,000 120,750 1,059,750 In-process research and development 261,000 261,000 Equipment (net) 344,000 108,000 452,000 Goodwill 34,800 34,800 Total assets $2,668,350 $385,750 $2,760,200 Accounts payable $150,000 $43,500 $193,500 Notes payable 378,000 54,750 6,400 426,350 Common stock 469,440 50,000 50,000 469,440 Additional paid-in capital 783,910 30,000 30,000 783,910 Retained earnings 887,000 207,500 207,500 887,000 Total liabilities and equities $2,668,350 $385,750 $870,950 $2,950 $2,760,200

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