Maurice Tutor
$15/per page/Negotiable
EXCEL CASE 2
On January 1, 2012, 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 Additional Paid-in Capital (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 do- main name was estimated to have a 10-year life. By the end of 2012, 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, 2013, Wi-Free’s accounts payable include a
$30,000 amount owed to Hi-Speed.
The December 31, 2013, trial balances for the parent and subsidiary follow:
|
  Revenues |
Hi-Speed.com $(1,100,000) |
Wi-F r e e Co. $(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 1/1/13 |
$(1,552,500) |
$(450,000) |
|
Net income |
(460,500) |
(180,000) |
|
Dividends paid |
250,000 |
50,000 |
|
Retained earnings 12/31/13 |
$(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 12/31/13 |
(1,763,000) |
(580,000) |
|
Total liabilities and equity |
$(3,253,000) |
$(880,000) |
Requi r ed
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.