On January 1, NewTune Company exchanges 19,633 shares of its common stock for all of the outstanding shares ofOn-the-Go, Inc. Each of NewTune's shares has a $4 par value and a $50 fair value. The fair value of the stockexchanged in the acquisition was considered equal to On-the-Go's fair value. NewTune also paid $45,550 in stockregistration and issuance costs in connection with the merger.Several of On-the-Go's accounts' fair values differ from their book values on this date (credit balances inparentheses):ВookFairValuesValues$ 62,500 $ 60,400294,500270,000243,000(61,700)ReceivablesTrademarks05,50075,750Record music catalogIn-process research and developmentNotes payable(67,000)Precombination book values for the two companies are as follows:NewTuneOn-the-Go76,000 $ 52,75062,500105,50075,750139,000$ 1,930,000 $ 435,500$ (159,000) $ (51,500)(67,000)(50,000)(30,000)(890,000) (237,000)Total liabilities and equities $(1,930, 000) $(435,500)CashReceivables162,000485,000875,000TrademarksRecord music catalogEquipment (net)332,000Total AssetsAccounts payableNotes payable(451,000)(400,000)(30,000)Common stockAdditional paid-in capitalRetained earningsa. Assume that this combination is a statutory merger so that On-the-Go's accounts will be transferred to therecords of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare apostcombination 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 theirseparate legal identities. Prepare a worksheet to consolidate the two companies as of the combination date.

(a) Post Combination Balance Sheet :- Assets Liabilities & Owners Equity Cash…

e-Go, Inc. Each of NewTune's shares has a $4 par value and a $50 fair value. anged in the acquisition was considered equal to On-the-Go's fair value. NewTu tration and issuance costs in connection with the merger. ral of On-the-Go's accounts' fair values differ from their book values on this dat ntheses): Вook Fair Values Values $ 62,500 $ 60,400 294,500 270,000 243,000 (61,700) ceivables ademarks cord music catalog -process research and development ces payable 105,500 75,750 (67,000)

e-Go, Inc. Each of NewTune's shares has a $4 par value and a $50 fair value. anged in the acquisition was considered equal to On-the-Go's fair value. NewTu tration and issuance costs in connection with the merger. ral of On-the-Go's accounts' fair values differ from their book values on this dat ntheses): Вook Fair Values Values $ 62,500 $ 60,400 294,500 270,000 243,000 (61,700) ceivables ademarks cord music catalog -process research and development ces payable 105,500 75,750 (67,000)

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

See similar textbooks

Similar questions

On January 1, 20X2, Parent Inc. issued 32,000 shares of its P10 par value common stock for all the outstanding shares of Son Company. The fair value of Parent Inc.'s stock is P25 per share. Parent Inc. pays P50,000 in registering the stocks. Given below are the statements of financial position (SFP) of the companies before the acquisition: Parent Inc. Statement of Financial Position January 1, 20X2 Assets Liabilities and Equity P210,000 420,000 400,000 500,000 505,000 P2,035,000 Cash P200,000 Accounts Payable 185,000 Bonds Payable 190,000 Common Stock, P10 par value 300,000 Additional Paid-In Capital (APIC) 740,000 Retained Earnings 420,000 Total Liabilities and Equity P2,035,000 Accounts Receivable Inventory Land Building, net of depreciation Equipment, net of depreciation Total Assets Son Company Statement of Financial Position January 1, 20X2 Book Value Fair Value P55,000 150,000 130,000 500,000 300,000 P1,135,000 Accounts Receivable Inventory Land P55,000 130,000 85,000 320,000…
On January 1, Paisley, Inc., paid $560,000 for all of Skyler Corporation’s outstanding stock. This cash payment was based on a price of $180 per share for Skyler’s $100 par value preferred stock and $38 per share for its $20 par value common stock. The preferred shares are voting, cumulative, and fully participating. At the acquisition date, the book values of Skyler’s accounts equaled their fair values. Any excess fair value is assigned to an intangible asset and will be amortized over a 10-year period. During the year, Skyler sold inventory costing $60,000 to Paisley for $90,000. All but $18,000 (measured at transfer price) of this merchandise has been resold to outsiders by the end of the year. At the end of the year, Paisley continues to owe Skyler for the last shipment of inventory priced at $28,000. Also, on January 2 Paisley sold Skyler equipment for $20,000 although it had a carrying amount of only $12,000 (original cost of $30,000). Both companies depreciate such property…
On January 1, 20X2, Parent Inc. issued 32,000 shares of its P10 par value common stock for all the outstanding shares of Son Company. The fair value of Parent Inc.'s stock is P25 per share. Parent Inc. pays P50,000 in registering the stocks. Given below are the statements of financial position (SFP) of the companies before the acquisition: Parent Inc. Statement of Financial Position January 1, 20X2 Assets Liabilities and Equity P200,000 Accounts Payable 185,000 Bonds Payable 190,000 Common Stock, P10 par value 300,000 Additional Paid-In Capital (APIC) 740,000 Retained Earnings 420,000 Total Liabilities and Equity Cash P210,000 420,000 400,000 500,000 505,000 P2,035,000 Accounts Receivable Inventory Land Building, net of depreciation Equipment, net of depreciation Total Assets P2,035,000 Son Company Statement of Financial Position January 1, 20X2 Book Value Fair Value Accounts Receivable P55,000 130,000 85,000 320,000 140,000 P730,000 P55,000 150,000 130,000 500,000 300,000 P1,135,000…
On January 1, NewTune Company exchanges 17,049 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 $37,300 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 (credit balances in parentheses): Book Values Fair Values Receivables $ 77,500 $ 72,400 Trademarks 108,000 238,500 Record music catalog 75,500 197,750 In-process research and development 0 262,500 Notes payable (68,500 ) (60,400 ) Precombination book values for the two companies are as follows: NewTune On-the-Go Cash $ 73,250 $ 44,000 Receivables 152,750 77,500 Trademarks 462,000 108,000 Record music catalog 875,000…
On January 1, 20x4, the Alpha Company entered into a transaction for acquisition of assets and liabilities of Beta Company. Alpha issued P400 in long-term liabilities and 40 shares of ordinary shares having a par value of P1 per share but a fair value of P10 per share. Alpha paid P20 to lawyers, accountants and brokers for assistance in bringing about this purchase. Another P15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Item.. ..Alpha .Beta Cash.. P 180 ..P 40 Accounts Receivable...... 810..180 Inventory... 1,080.. 280 Land. . 600.. 360 Buildings (net).. .1,260.. 440 Equipment (net).. 480... 100 .....- Accounts Payable........( 450)..( 80) Long-term liabilities......(1,290)..( 400) Ordinary Shares, P1 par....( 330) Ordinary Shares, P20 par .( 240) Share Premium.. ( 1,080)..( 340) Retained Earnings.......(1,260).. ( 340) Note: Parentheses indicate a credit balance.
On January 1, 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 (credit balances in parentheses): 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– 200,000 Notes payable (50,000) (45,000) Precombination 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…
On January 1, 2015, Port Company acquires 8,000 shares of Solvo Company by issuing 10,000 of its common stock shares with a par value of $10 per share and a fair value of $70 per share. The price paid reflects a control premium. The market value of the shares owned by the NCI is $80 per share. At the time of the purchase, Solvo has the following balance sheet:Appraisals indicate that book values are representative of fair values with the exception of the land and building. The land has a fair value of $180,000, and the building is appraised at $450,000. The building has an estimated remaining life of 20 years. Any remaining excess is goodwill.The following summary of Solvo’s retained earnings applies to 2015 and 2016:Balance, January 1, 2015. . . . . . . . . . . . . . . . . . . $250,000Net income for 2015. . . . . . . . . . . . . . . . . . . . . 60,000Dividends paid in 2015. . . . . . . . . . . . . . . . . . . (10,000)Balance, December 31, 2015 . . . . . . . . . . . . . . . $300,000Net…
On January 1, NewTune Company exchanges 18.100 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 $33,500 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 (credit balances in parentheses): Book Values Fair Values $ 68,750 $ 66,000 282,000 113,250 68,750 B (72,250) Receivables Trademarks Record music catalog In-process research and development Notes payable Precombination book values for the two companies are as follows: On-the-Go 70,750 $ 40,500 30,250 68,750 486,000 113,250 853,000 68,750 413,000 110,000 $ 1,853,000 $ 401,250 Cash Receivables Trademarks Record music catalog Equipment (net) Total Assets Accounts payable Notes payable Common stock Additional…
On January 1, 2018, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $ 180 $ 40 Receivables 810 180 Inventories 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable (450 ) (80 ) Long-term liabilities (1,290 ) (400 ) Common stock ($1 par) (330 ) Common stock ($20 par) (240 ) Additional paid-in capital (1,080 ) (340 ) Retained…
On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $ 180 $ 40 Receivables 810 180 Inventories 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable (450 ) (80 ) Long-term liabilities (1,290 ) (400 ) Common stock ($1 par) (330 ) Common stock ($20 par) (240 ) Additional paid-in capital (1,080 ) (340 ) Retained…
When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: Pavin Sutton Common stock $ 4,000,000 $ 700,000 Paid-in capital in excess of par 7,500,000 900,000 Retained earnings 5,500,000 500,000 Total $17,000,000 $2,100,000 Immediately after the purchase, the consolidated balance sheet should report retained earnings of: a. $6,000,000 b. $5,800,000 c. $5,500,000 d. $5,300,000
Marcus Company made the following transactions in the ordinary shares of Cato Company designated as a financial asset at fair value through profit or loss: July 16, 2018- Purchased 10,000 shares at P45 per share. nces June 28, 2019 - Sold 2,000 shares for P51 per share. ations May 18, 2020 - Sold 2,500 shares for P33 per share. The end-of-year market prices for the shares were as follows: December 31, 2018 - P47 per share December 31, 2019 P39 per share December 31, 2020 P31 per share 1. How much should be recognized in 2020 profit or loss as a result of the fair value changes? (use negative sign if your answer is a loss) 2. How much should be recognized as realized gain on sale for the year ended December 31, 2020? (use negative sign if your answer is a loss) 1 2)