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:

Wi-Free fair value (cash paid by Hi-Speed) $730,000

Book value of Wi-Free:

Common stock and APIC $130,000

Retained earnings 370,000 500,000

Excess fair value over book value to $230,000

In-process R&D 75,000

Computer software (overvalued) (30,000)

Internet domain name 120,000 165,000

Goodwill $ 65,000

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 inprocess

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:

Hi-Speed.com Wi-Free Co.

Revenues $(1,100,000) $(325,000)

Cost of goods sold 625,000 122,000

Depreciation expense 140,000 12,000

Amortization expense 50,000 11,000

Equity in subsidiary earnings (175,500) -0-

Net income $ (460,500) $(180,000)

Retained earnings 1/1/11 $(1,552,500) $(450,000)

Net income (460,500) (180,000)

Dividends paid 250,000 50,000

Retained earnings 12/31/11 $(1,763,000) $(580,000)

Current assets $ 1,034,000 $ 345,000

Investment in Wi-Free 856,000 -0-

Equipment (net) 713,000 305,000

Computer software 650,000 130,000

Internet domain name -0- 100,000

Goodwill -0- -0-

Total assets $ 3,253,000 $ 880,000

Liabilities $ (870,000) $(170,000)

Common stock (500,000) (110,000)

Additional paid-in capital (120,000) (20,000)

Retained earnings 12/31/11 (1,763,000) (580,000)

Total liabilities and equity $(3,253,000) $(880,000)

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.