On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $9,097,000 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 $2,604,500 including retained earnings of $1,804,500.

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 Book Value Fair Value Remaining

Useful Life Patented technology $ 187,500 $ 2,952,500 7 years Computer software $ 88,500 $ 3,568,500 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:

Net Income Dividends 2019 $ 901,900 $ 150,000 2020 941,900 150,000 2021 976,900 150,000

December 31, 2021, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period.

Persoff Sea Cliff Income Statement Revenues $ (2,910,000 ) $ (2,345,000 ) Cost of goods sold 1,443,100 906,100 Depreciation expense 322,500 418,000 Amortization expense 427,000 44,000 Equity earnings in Sea Cliff (291,900 ) 0 Net income $ (1,009,300 ) $ (976,900 ) Statement of Retained Earnings Retained earnings 1/1 $ (7,565,000 ) $ (3,348,300 ) Net income (above) (1,009,300 ) (976,900 ) Dividends declared 600,000 150,000 Retained earnings 12/31 $ (7,974,300 ) $ (4,175,200 ) Balance Sheet Current assets $ 575,500 $ 422,500 Investment in Sea Cliff 9,412,700 0 Computer software 395,000 73,500 Patented technology 914,000 118,000 Goodwill 138,000 0 Equipment 1,901,500 4,690,000 Total assets $ 13,336,700 $ 5,304,000 Liabilities $ (3,362,400 ) $ (328,800 ) Common stock (2,000,000 ) (800,000 ) Retained earnings 12/31 (7,974,300 ) (4,175,200 ) Total liabilities and equity $ (13,336,700 ) $ (5,304,000 )

Note: Parentheses indicate a credit balance.

1. Determine the fair value in excess of book value for Persoff's acquisition date investment in Sea Cliff.
2. Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2021.
3. Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance.
4. Prepare a worksheet to determine the consolidated values to be reported on Persoff's financial statements.

• omplete 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 ?Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2021.

Entries?

Amounts

• Equity earnings in Sea Cliff

Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance.

Entries?

Prepare a worksheet to determine the consolidated values to be reported on Persoff's 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. Input all amounts as positive values.)

Show less

PERSOFF CORPORATION AND CONSOLIDATED SUBSIDIARYConsolidation WorksheetFor Year December 31, 2021

Consolidation Entries

AccountsPersoffSea CliffDebitCreditConsolidated TotalsIncome Statement

Revenues $(2,910,000)$(2,345,000)

$5,255,000Cost of goods sold 1,443,100906,100

2,349,200Depreciation expense322,500418,000

Amortization expense427,00044,000

Equity earnings in Sea Cliff (291,900)

291,900

Net income $(1,009,300)$(976,900)

$(1,009,300)

Statement of Retained Earnings

Retained earnings 1/1 (7,565,000)(3,348,300)3,348,300

(7,565,000)Net income (above)(1,009,300)(976,900)

(1,009,300)Dividends declared 600,000150,000

600,000 Retained earnings 12/31 $(7,974,300)$(4,175,200)

$(7,974,300)

Balance Sheet

Current assets $575,500$422,500

$998,000Investment in Sea Cliff 9,412,700

150,0009,562,700

Computer software 395,00073,500

Patented technology 914,000118,000

Goodwill 138,0000

Equipment 1,901,5004,690,000

Total assets $13,336,700$5,304,000

Liabilities (3,362,400)(328,800)

3,691,200Common stock (2,000,000)(800,000)800,000

(2,000,000)Retained earnings 12/31 (7,974,300)(4,175,200)

7,974,300 Total liabilities and equity $(13,336,700)$(5,304,000)$4,590,200$9,562,700

entries?