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compute consolidated balances for Hi-Speed and Wi-Free




compute consolidated balances for Hi-Speed and Wi-Free;On January 1, 2010, 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 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;;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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