Statutory Merger Application

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timer Asked: Oct 21st, 2018
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Problem 31, "Applying the Purchase Method," on page 81. This problem tests your application of the statutory merger method for business combinations. Template and problem attached.

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u02a2 Template Problem 31, page 81. (Prepare balance sheet for a statutory merger using the acquisition method. Also, use worksheet to derive consolidated totals.) a. u02a2 Template Problem 31 (continued): Post-Combination Balance Sheet: b. u02a2 Template 31. (continued) b. Accounts Cash Receivables Investment in On-the-Go NEWTUNE, INC., AND ON-THE-GO CO. Consolidation Worksheet January 1, 2015 Consolidation Entries NewTune, Inc. On-the-Go Co. Debit Credit Consolidated Totals Trademarks Record music catalog Research and development asset Equipment Goodwill Totals Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Totals c. 3 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 $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 $25,000 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000 $ 63,000 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 225,000 Record music catalog . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 180,000 In-process research and development . . . . . . . . . . . . . –0– Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,000) 200,000 (45,000) Precombination January 1, 2015, book values for the two companies are as follows: NewTune On-the-Go Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 29,000 Receivables . . . . . . . . . . . . . . . . . . 150,000 65,000 Trademarks. . . . . . . . . . . . . . . . . . . 400,000 95,000 Record music catalog . . . . . . . . . . . 840,000 60,000 Equipment (net). . . . . . . . . . . . . . . . 320,000 105,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . $ 1,770,000 $ 354,000 Accounts payable. . . . . . . . . . . . . . . $ (110,000) $ (34,000) Notes payable. . . . . . . . . . . . . . . . . . (370,000) (50,000) Common stock. . . . . . . . . . . . . . . . . (400,000) (50,000) Additional paid-in capital . . . . . . . . (30,000) (30,000) Retained earnings. . . . . . . . . . . . . . . (860,000) (190,000) Totals . . . . . . . . . . . . . . . . . . . . . . . . $(1,770,000) $(354,000) 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)? ...
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Dr_lucy
School: UT Austin

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Anonymous
Thanks, good work

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