On January 3, 2013, 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 Cliffs 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:

Asset	Book Value		Fair Value		Remaining Useful Life
Patented technology	$	140,000	$	2,240,000	7 years
Computer software		60,000		1,260,000	12 years

Sea Cliffs 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
2013	$	900,000	$	150,000
2014		940,000		150,000
2015		975,000		150,000

December 31, 2015, financial statements for each company appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period.

		Persoff				Sea Cliff
Income Statement
Revenues		$	(2,720,000	)		$	(2,250,000	)
Cost of goods sold			1,350,000				870,000
Depreciation			275,000				350,000
Amortization			370,000				55,000
Equity earnings in Sea Cliff			(575,000	)			0
Net income		$	(1,300,000	)		$	(975,000	)
Statement of Retained Earnings
Retained earnings, 1/1		$	(7,470,000	)		$	(3,240,000	)
Net income (above)			(1,300,000	)			(975,000	)
Dividends declared			600,000				150,000
Retained earnings, 12/31		$	(8,170,000	)		$	(4,065,000	)
Balance Sheet
Current assets		$	490,000			$	375,000
Investment in Sea Cliff			7,165,000				0
Computer software			300,000				45,000
Patented technology			800,000				80,000
Goodwill			100,000				0
Equipment			1,835,000				4,500,000
Total assets		$	10,690,000			$	5,000,000
Liabilities		$	(520,000	)		$	(135,000	)
Common stock			(2,000,000	)			(800,000	)
Retained earnings, 12/31			(8,170,000	)			(4,065,000	)
Total liabilities and equity		$	(10,690,000	)		$	(5,000,000	)

Note: Parentheses indicate a credit balance.

a.

Determine the fair value in excess of book value for Persoff's acquisition date investment in Sea Cliff.

b.

Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2015.

c. Determine Persoff's December 31, 2015, Investment in Sea Cliff's balance

d.

Prepare a worksheet to determine the consolidated values to be reported on Persoffs financial statements. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)