On January 1, 2023, 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 2023, 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, 2024, Wi-Free’s accounts payable included a $30,000 amount owed to Hi-Speed.

The December 31, 2024, 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 balances directly.

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Wi-Free fair value (cash paid by Hi-Speed) Book value of Wi-Free: Common stock and additional paid-in capital (APIC) Retained earnings Excess fair value over book value to In-process R&D Computer software (overvalued) Internet domain name Goodwill $130,000 370,000 $ 75,000 (30,000) 120,000 $730,000 500,000 230,000 165,000 $ 65,000