On January 1, 2014, 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 remaining life. By the end of 2014, 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, 2015, Wi-Free’s accounts payable include a $30,000 amount owed to Hi-Speed.
The December 31, 2015, 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 Additional Paid-in Capital (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 Wi-Free Co Revenues Cost of goods sold Depreciation expense Amortization expense Equity in subsidiary earnings $(1,100,000) 625,000 140,000 50,000 (175,500) $(325,000) 122,000 12,000 11,000 Net income (460,500) (180,000) Retained earnings 1/1/15 Net income Dividends declared $(1,552,500) (460,500) 250,000 1.763.000) $1,034,000 856,000 713,000 650,000 $(450,000) (180,000) 50,000 $(580,000) Retained earnings 12/31/15 Current assets Investment in Wi-Free Equipment (net) Computer software Internet domain name Goodwill 345,000 305,000 130,000 100,000 Total assets Liabilities Common stock Additional paid-in capital Retained earnings 12/31/15 3,253,000 $ (870,000) (500,000) (120,000) 880,000 $(170,000) (110,000) (20,000) 1763,000) (580,000) $(3,253,000) (880,000) Total liabilities and equity