On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc. in exchange for $9,586,000 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 $2,621,000 including retained earnings of $1,821,000 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 Book Value Fair Value 195,000 3,065,000 3,933,000 Remaining Useful Life 7 years 12 years Asset Patented technology Computer software 93,000 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 2016 2017 2018 Net Income Dividends s 150,000 150,000 150,000 $ 902,200 942,200 977,200 December 31, 2018, financial statements for each company appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period December 31, 2018, 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 Cost of goods sold Depreciation expense Amortization expense Equity earnings in Sea Cliff Net income Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared $ (2,940,000) $ (2,360,000) 1,457,800 330,000 436,000 247,200 911,800 424,000 47,000 s(963,400) $ (977,200) (7,580,000 963,400) 600.000 s (3,365,400) (977,200) 150,000 (7,943,400) $ (4,192,600) Retained earnings 12/31 Balance Sheet Current assets Investment in Sea Cliff Computer software Patented technology Goodwill Equipment Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity $589,000 9,767,600 410,000 932,000 144,000 1,912,000 13,754,600 430,000 78,000 124,000 $ (3,811,200) (7,943,400) $ (13,754,600) 4,720,000 5,352,000 $ (359,400) (4,192,600) $ (5,352,000) (2,000,000) (800,000) 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, 2018 c. Determine Persoff's December 31, 2018, Investment in Sea Cliff's balance d. Prepare a worksheet to determine the consolidated values to be reported on Persoff's financial statements Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine the fair value in excess of book value for Persoff's acquisition date investment in Sea Cliff Fair value in excess of book value Required A Required B
