On January 1, 2010, Hi-Speed.com acquired 100 percent of the common stock of Wi-Free Co. for cash of $730,000. The consideration transferred was allocated among Wi-Free€™s net assets as follows:

At the acquisition date, the computer software had a 4-year remaining life, and the Internet domain name was estimated to have a 10-year life. By the end of 2010, it became clear that the acquired in process research and development would yield no economic benefits and Hi-Speed.com recognized an impairment loss. At December 31, 2011, Wi-Free€™s accounts payable include a $30,000 amount owed to Hi-Speed.
The December 31, 2011, trial balances for the parent and subsidiary follow:

Required
a. Using Excel, prepare calculations showing how Hi-Speed derived the $856,000 amount for its investment in Wi-Free.
b. Using Excel, compute consolidated balances for Hi-Speed and Wi-Free. Either use a worksheet approach or compute the balancesdirectly.

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Wi-Free fair value (cash paid by Hi-Speed) Book value of Wi-Free: $730,000 Common stock and APIC Retained earnings $130,000 370,000 500,000 $230,000 Excess fair value over book value to In-process R&D Computer software (overvalued) Internet domain name Goodwill 75,000 (30,000) 120,000 165,000 65.000 Hi-Speed.com Revenues Cost of goods sold Depreciation expense Amortization expense Equity in subsidiary earnings $(1,100,000) 625,000 140,000 50,000 (175,500) $ (460.500) WI-Free Co. $(325,000) 122,000 12,000 11,000 Net income $180,000) Retained earnings 1/1/11 Net income Dividends paid $(1,552,500) (460,500) 250,000 $(450,000) (180,000) 50,000 Retained earnings 1231/11 Current assets Investment in Wi-Free Equipment (net) Computer software Internet domain name Goodwill $(1,763,000) $(580,000) $ 1,034,000 856,000 713,000 650,000 $ 345,000 305,000 130,000 100,000 Total assets Liabilities Common stock Additional paid-in capital Retained earnings 12/B1/11 3,253,000 $ (870,000) (500,000) (120,000) (1,763,000) $(3,253,000) 880,000 $(170,000) (110,000) (20,000) (580,000) $(880,000) Total liabilities and equity