On January 3, 2019, 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 Fair Value $ 177,500 $ 2,802,500 $ 82,500 $ 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: Net Income Dividends 2019 2020 2021 $ 901,500 $ 150,000 941,500 976,500 150,000 150,000 December 31, 2021, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Equity earnings in Sea Cliff Net income Statement of Retained Earnings Retained earnings 1/11 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 Total liabilities and equity Persoff Sea Cliff $ (2,870,000) $(2,325,000) 1,423,500 312,500 415,000 (351,500) $ (1,070,500) $ (7,545,000) (1,070,500) 600,000 $ (8,015,500) $ 557,500 8,939,500 375,000 890,000 130,000 1,887,500 $ 12,779,500 $ (2,764,000) (2,000,000) (8,015,500) $(12,779,500) 898,500 410,000 40,000 0 $ (976,500) $(3,325,500) (976,500) 150,000 $(4,152,000) $ 412,500 67,500 110,000 0 4,650,000 $ 5,240,000 $ (288,000) (800,000) (4,152,000) $(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, 2021. c. Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance. d. Prepare a worksheet to determine the consolidated values to be reported on Persoff's financial statements. 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 Required C Required D Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2021. Equity earnings in Sea Cliff Amounts Required A Required B Required C Required D Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance. Investment in Sea Cliff Amounts PERSOFF CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year December 31, 2021 Persoff Sea Cliff Debit Consolidation Entries Credit Consolidated Totals Accounts 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 $ (2,870,000) $ (2,325,000) 1,423,500 898,500 312,500 410,000 415,000 40,000 (351,500) $ (1,070,500) $ (976,500) (7,545,000) (3,325,500) (1,070,500) 600,000 (976,500) 150,000 $ (8,015,500) $ (4,152,000)| 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 $ 557,500 $ 412,500 8,939,500 375,000 67,500 890,000 110,000 130,000 1,887,500 4,650,000 $ 12,779,500 $ 5,240,000 (2,764,000) (2,000,000) (288,000) (800,000) (8,015,500) (4,152,000) $ (12,779,500) $ (5,240,000)| 8,015,500