On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,000,000 in cash. Persoff elected to exercise control over Sea Cliff as a wholly owned subsidiary with an independent accounting system. Both companies have December 31 fiscal year-ends. At the acquisition date, Sea Cliff's stockholders' equity was $2,500,000 including retained earnings of $1,700,000.
Persoff pursued the acquisition, in part, to utilize Sea Cliff's technology and computer software. These items had fair values that differed from their values on Sea Cliff's books as follows:

Sea Cliff's remaining identifiable assets and liabilities had acquisition-date book values that closely approximated fair values. Since acquisition, no assets have been impaired. During the next three years, Sea Cliff reported the following income and dividends:
______________ Net Income ____________ Dividends
2016 .............. $900,000 ...................... $150,000
2017 ............... 940,000 ........................ 150,000
2018 ............... 975,000 ........................ 150,000
December 31, 2018, financial statements for each company appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period.

a. Construct Persoff's acquisition-date fair-value allocation schedule for its investment in Sea Cliff.
b. Show how Persoff determined its Equity earnings in Sea Cliff balance for the year ended
December 31, 2018.
c. Show how Persoff determined its December 31, 2018, Investment in Sea Cliff balance.
d. Prepare a worksheet to determine the consolidated values to be reported on Persoff's financial statements?

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Book Value $140,000 $60,000 Fair Value $2,240,000 $1,260,000 Asset Useful Life Patented technology Computer software 7 years 12 years Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Equity earnings in Sea Cliff Net income Persoff Sea Cliff $ (2,720,000) 1,350,000 275,000 370,000 575,000) $(2,250,000) 870,000 380,000 25,000 $ (1.300 $ (975 Statement of Retalned Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 $ (7,470,000) (1,300,000) 600,000 $(3,240,000) (975,000) 150,000 4,065 Balance Sheet Current assets Investment in Sea Cliff Computer software Patented technology Goodwil Equipment Total assets $ 490,000 7,165,000 300,000 800,000 100,000 1,835,000 $10,690,000 $ 375,000 0- 45,000 80,000 0- 4,500,000 5,000,000 $ (520,000) (2,000,000) $(135,000) (800,000) Liabilities Common stock Retained earnings 12/31 Total liabilities and equity 170 4,065 $(5,000 (10,690,000)