I really need help with this please 31. On January 1, 2015, NewTune Company exch
ID: 2528515 • Letter: I
Question
I really need help with this please
31. On January 1, 2015, NewTune Company exchanges 15,000 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 S50 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 S25,000 in stock registration and issaance 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 $ 63,000 225,000 180,000 200,000 (45,000) 65,000 95,000 60,000 Record music catalog In-process research and development Notes payable (50,000) Precombination January 1, 2015, book values for the two companies are as follow NewTune On-the-Go s 29,000 65,000 95,000 60,000 105,000 Cash S 60,000 Trademarks. Record music catalog Equipment (net). Totals 150,000 400,000 840,000 320,000 1,770,000 354,00 Accounts payable Notes payable Common stock Additional paid-in capital Retained earmings S (110,000) (370,000) (400,000) (30,000) (860,000) S (34,000) (50,000) (50,000) (30,000) (190,000) Totals 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. 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. c. How do the balance sheet accounts compare across parts (a) and (b)?Explanation / Answer
SOLUTION:
1)
NewTune acquires 100% of On-the-Go with issuance of 15,000 shares of their $4 par value. Common market value $50/share
15,000 @ 50 = 750,000; 15,000 @ 4 = 60,000; 750,000 - 60,000 = 690,000
FV of net assets acquired:
Cash
$29,000
Record Music
$180,000
IP R&P
$200,000
Receivables
$63,000
Trademarks
$225,000
Equipment
$105,000
Accounts payable
-$34,000
Notes payable
-$45,000
$723,000
Working
Goodwill
23,000
750,000 – 723,000 = 23,000
Fair Value Of Identifiable
FV – BV
Net Assets
Receivables
-2,000
63,000 - 65,000
Trademarks
130,000
225,000 - 95,000
Record Music
120,000
180,000 - 60,000
In-process research and development
200,000
200,000 - 0
Note Payable
5,000
45,000 - 50,000
Excess Value Total
453,000
Book Value
Assets
354,00
Note
-50,000
Account Payable
-34,000
Book Value Total
270,000
01/01/2015
Cash
$ 29,000
Receivables
$ 63,000
Trademarks
$ 225,000
Record Music
$ 180,000
IP R&P
$ 200,000
Equipment
$ 105,000
Goodwill
$ 27,000
Notes Payable
$ 45,000
Accounts Payable
$ 34,000
Common Stock
$ 60,000
Additional Paid-In Capital
$ 690,000
01/01/2015
Investment
$ 750,000
Common Stock
$ 60,000
Paid-In Capital
$ 690,000
2) BARGAIN PURCHASE PRICE
Goodwill = FV of Identifiable Assets > 693,000
01/01/2015
Cash
$29,000
Receivables
$63,000
Trademarks
$225,000
Record Music
$180,000
IP R&P
$200,000
Equipment
$105,000
Bargain Purchase
$27,000
Notes Payable
$45,000
Accounts Payable
$34,000
Common Stock
$60,000
Additional Paid-In Capital
$690,000
01/01/2015
Investment
$723,000
Common Stock
$60,000
Paid-In Capital 723,000-(60,000- 27,000)
$636,000
Bargain Purchase
$27,000
NewTune acquires 100% of On-the-Go with issuance of 15,000 shares of their $4 par value. Common market value $50/share
15,000 @ 50 = 750,000; 15,000 @ 4 = 60,000; 750,000 - 60,000 = 690,000