On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $10,075,000 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 $2,637,500 including retained earnings of $1,837,500. 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 Remaining Book Value Fair Value Useful Life $ 202,500 $3,177,500 7 years $ 97,500 $4,297,500 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 $902,500 $ 150,000 2020 942,500 150,000 2021 977,500 150,000 December 31, 2021, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Sea Cliff $ (2,375,000) 917,500 430,000 50,000 $ (977,500) Persoff Income Statement Revenues $ (2,970,000) Cost of goods sold 1,472,500 Depreciation expense 337,500 Amortization expense 445,000 Equity earnings in Sea (202,500) Cliff Net income $ (917,500) Statement of Retained Earnings Retained earnings 1/1 $ (7,595,000) Net income (above) (917,500) Dividends declared 600,000 Retained earnings 12/31 $ (7,912,500) Balance Sheet Current assets $ 602,500 Investment in Sea Cliff 10, 122,500 Computer software 425,000 Patented technology 950,000 Goodwill 150,000 Equipment 1,922,500 Total assets $ 14,172,500 Liabilities $ (4,260,000) Common stock (2,000,000) Retained earnings 12/31 (7,912,500) Total liabilities and $ (14,172,500) equity $ (3,382,500) (977,500) 150,000 $(4,210,000) $ 437,500 0 82,500 130,000 0 4,750,000 $ 5,400,000 $ (390,000) (800,000) (4,210,000). $ (5,400,000) 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 Required Required Required A B 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 Complete this question by entering your answers in the tabs below. Required Required Required Required A B D Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2021. Amounts Equity earnings in Sea Cliff Complete this question by entering your answers in the tabs below. Required Required Required Required B D Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance. Amounts Investment in Sea Cliff Complete this question by entering your answers in the tabs below. Required Required Required Required A B D 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 SUBSIDIARY Consolidation Worksheet For Year December 31, 2021 Consolidation Entries Accounts Consolidate Persoff Sea Cliff Debit Credit Totals Income Statement $ $ Revenues (2,970,000) (2,375,000) Cost of goods sold 1,472,500 917,500 Depreciation expense 337,500 430,000 Amortization expense 445,000 50,000 Equity earnings in Sea Cliff (202,500) $ $ Net income (917,500)| (977,500) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (7,595,000) (3,382,500) (917,500) (977,500) 600,000 150,000 $ $ (7,912,500)|(4,210,000) Balance Sheet Current assets Investment in Sea Cliff Computer software Patented technology Goodwill Equipment $ 602,500 $ 437,500 10,122,500 425,000 82,500 950,000 130,000 150,000 0 1,922,500 4,750,000 $ $ 14,172,500 5,400,000 Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity (4,260,000) (390,000) (2,000,000) (800,000) (7,912,500)|(4,210,000) $ $ (14,172,500X5,400,000) 7,912,500 $ 0 $ 0