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compute consolidated balances for Hi-Speed and Wi-Free

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compute consolidated balances for Hi-Speed and Wi-Free;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.

 

Paper#28653 | Written in 18-Jul-2015

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