On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $9,260,000 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 $2,610,000 including retained earnings of $1,810,000. 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 Patented technology Computer software Book Value $ 190,000 $ 90,000 Fair Value $ 2,990,000 $ 3,690,000 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: 2019 2020 2021 Net Income $ 902,000 942,000 977,000 Dividends $ 150,000 150,000 150,000 December 31, 2021, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Persoff Sea Cliff $ (2,920,000) 1,448,000 325,000 430,000 (277,000) $ (994,000) $(2,350,000) 908,000 420,000 45,000 $ (977,000) 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 $ (7,570,000) (994,000) 600,000 $ (7,964,000) $(3,354,000) (977,000) 150,000 $(4,181,000) $ $ 580,000 9,531,000 400,000 920,000 140,000 1,905,000 425,000 0 75,000 120,000 4,700,000 1,964,000) $(4,181,000) 425,000 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 580,000 9,531,000 400,000 920,000 140,000 1,905,000 $ 13,476,000 $ (3,512,000) (2,000,000) (7,964,000) $(13,476,000) 75,000 120,000 0 4,700,000 $ 5,320,000 $ (339,000) (800,000) (4,181,000) $(5,320,000) 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. 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
