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:

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 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:

Required
a. Prepare calculations showing how Hi-Speed derived the $856,000 amount for its investment in Wi-Free.
b. 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) $730,000 Book value of Wi-Free: Common stock and Additional Paid-in Capital (APIC) Retained earnings $130,000 370,000 500,000 Excess fair value over book value to $230,000 544) (30,000) In-process R&D Computer software (overvalued Internet domain name Goodwill 12)) 165,000 65,000 Hi-S Equity in subsidiary earnings Retained earnings 1/1/13 Retained earnings 12/B1/13 Current assets Investment in Wi-Free 0 Computer software Retained earnings 12B1/13 Total liabilities and equity