On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,326,000 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 $2,511,000 including retained earnings of $1,711,000. 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 $ 145,000 $ 63,000 Fair Value $ 2,315,000 $ 1,503,000 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 $ 900,200 940,200 975,200 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. December 31, 2021, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Persoff Sea Cliff $ (2,740,000) 1,359,800 280,000 376,000 (545,200) $ (1,269,400) $(2,260,000) 873,800 384,000 27,000 $ (975,200) $ (7,480,000) (1,269,400) 600,000 $ (8,149,400) $(3,251,400) (975,200) 150,000 $(4,076,600) 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 Total liabilities and equity $ 380,000 0 48,000 84,000 $ 499,000 7,401,600 310,000 812,000 104,000 1,842,000 $ 10,968,600 $ (819, 200) (2,000,000) (8,149,400) $(10,968,600) 4,520,000 $ 5,032,000 $ (155,400) (800,000) (4,076,600) $(5,032,000 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 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, 2021. Amounts Equity earnings in Sea Cliff Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine Persoff's December 31, 2021, Investment in Sea Cliff's balance. Amounts Investment in Sea Cliff Show less Consolidated Totals PERSOFF CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year December 31, 2021 Consolidation Entries Accounts Persoff Sea Cliff Debit Credit Income Statement Revenues $ 2,740,000) $ (2,260,000) Cost of goods sold 1,359,800 873,800 Depreciation expense 280,000 384,000 Amortization expense 376,000 27,000 Equity earnings in Sea Cliff (545,200) Net income $ (1,269,400) $ (975,200) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (7,480,000) (3,251,400) (1,269,400) (975,200) 600,000 150,000 $ (8, 149,400) $ (4,076,600) Balance Sheet Current assets Investment in Sea Cliff Computer software Patented technology Goodwill Equipment Total assets $ 499,000 $ 380,000 7,401,600 310,000 48,000 812,000 84,000 104,000 0 1,842,000 4,520,000 $ 10,968,600 $ 5,032,000 Liabilities Common stock Retained earnings 12/31 Total liabilities and equity (819,200) (155,400) (2,000,000) (800,000) (8.149,400) (4,076,600) $(10,968,600) $ (5,032,000) 8,149,400
