On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc. in exchange for $8,445,000 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 $2,582,500 including retained earnings of $1,782,500. 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 Patented technology Computer software Book Value $ 177,500 82,500 Fair Value $ 2,802,500 3,082,500 Remaining Useful Life 7 years 12 years 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 $ 901,500 941,500 976,500 Dividendo $ 150,000 150,000 150,000 December 31, 2018, financial statements for each company appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period. Persoft Sea Cliff $ (2,870,000) 1,423,500 312,500 415,000 (351,500) $ (1,070,500) $(2,325,000) 898,500 410,000 40,000 0 $ (976,500) 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 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 $ (7,545,000) (1,070,500) 600,000 $ (8,015,500) $(3, 325,500) (976,500) 150,000 $(4,152,000) $ 557,500 8,939,500 375,000 890,000 130,000 1,887,500 $ 12,779,500 $ (2,764,000) (2,000,000) (0,015,500) $ 412,500 0 67,500 110,000 0 4,650,000 $ 5,240,000 (280,000) (800,000) (4,152,000) Rutin ang 14/5 Total liabilities and equity 10, $(12,779,500) JAVU $(5,240,000) 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. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required 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 $ 5,862,500 Reguld Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required Required D Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2018. Equity accrual 976,500 625,000 Amortization expense Equity earnings in Sea Cliff S 351,500 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine Persoff's December 31, 2018, Investment in Sea Cliff's balance. Fair value at 1/1/16 Post-acquisition earnings net of amortization Sea Cliff dividends since acquisition $ 8,445,000 944,500 450,000 $ 8,939,500 Investment in Sea Cliff PERSOFF CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year December 31, 2018 Consolidation Entries Accounts Persoff Sea Cliff Debit Credit Consolidated Totals Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Equity earnings in Sea Cliff Net income $(2,870,000) 1,423,500 312,500 415,000 (351,500) $(1,070,500) (2.325,000) 898,500 410,000 40,000 $ (5,195,000) 2,322,000 722,500 455,000 3 351,500 $ (1,344,000) $ (976,500) Statement of Retained Earnings Retained earnings 1/1 Net Income (above Dividends declared 3,325,500 (7,545,000) (1,070,500) 600,000 (3,325,500) (976,500) 150,000 (7,545,000) (1,344,000) 600.000 150.000 19.102.02 Balance Sheet $ 412,500 S 970,000 8,939,500 X Current assets Investment in Sea Cliff Computer software Patented technology Goodwill Equipment Total assets $ 557,500 8,939,500 375,000 890,000 130,000 1,887,500 $ 12,779,500 67.500 110,000 0 4,650,000 $ 5,240,000 2,250,000 1,500,000 237,500 2,692,500 2,500,000 367,500 6,537,500 $ 13,067,500 4 800,000 Liabilities Common stock Retained earnings 12/31 Total liabilities and equity (2.764,000) (2,000,000) (8,015,500) $ (12.779,500) (288,000) (800,000) (4.152,000) S (5,240,000 (3,052,000) (2,000,000) (8,289,000) S (13,341,000) $ 8,113,000 S 9,089,500 Required A Required B Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual financial statements? $ 150,500 Equity in Earnings of Aaron Retained Earnings, 1/1/18 Investment in Aaron $ 1,183,000 S 874,500