On January 3, 2024, P Corporation acquired all of the outstanding voting stock of S Cliff, Inc., in exchange for $7,630,000 in cash. P elected to exercise control over S Cliff as a wholly owned subsidiary with an independent accounting system. Both companies have December 31 fiscal year-ends. At the acquisition date, S Cliffs stockholders equity was $2,555,000 including retained earnings of $1,755,000.

P pursued the acquisition, in part, to utilize S Cliffs technology and computer software. These items had fair values that differed from their values on S Cliffs books as follows:

Asset	Book Value		Fair Value		Remaining Useful Life
Patented technology	$	165,000	$	2,615,000	7 years
Computer software	$	75,000	$	2,475,000	12 years

S Cliffs 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, S Cliff reported the following income and dividends:

	Net Income		Dividends
2024	$	901,000	$	150,000
2025		941,000		150,000
2026		976,000		150,000

December 31, 2026, financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid in the same period.

	P				S Cliff
Income Statement
Revenues	$	(2,820,000	)		$	(2,300,000	)
Cost of goods sold		1,399,000				889,000
Depreciation expense		300,000				400,000
Amortization expense		400,000				35,000
Equity earnings in S Cliff		(426,000	)			0
Net income	$	(1,147,000	)		$	(976,000	)
Statement of Retained Earnings
Retained earnings 1/1	$	(7,520,000	)		$	(3,297,000	)
Net income (above)		(1,147,000	)			(976,000	)
Dividends declared		600,000				150,000
Retained earnings 12/31	$	(8,067,000	)		$	(4,123,000	)
Balance Sheet
Current assets	$	535,000			$	400,000
Investment in S Cliff		8,348,000				0
Computer software		350,000				60,000
Patented technology		860,000				100,000
Goodwill		120,000				0
Equipment		1,870,000				4,600,000
Total assets	$	12,083,000			$	5,160,000
Liabilities	$	(2,016,000	)		$	(237,000	)
Common stock		(2,000,000	)			(800,000	)
Retained earnings 12/31		(8,067,000	)			(4,123,000	)
Total liabilities and equity	$	(12,083,000	)		$	(5,160,000	)

Note: Parentheses indicate a credit balance.

1. Determine the fair value in excess of book value for P's acquisition date investment in S Cliff.

2. Determine P's Equity earnings in S Cliff's balance for the year ended December 31, 2026.

3. Determine P's December 31, 2026, Investment in S Cliff's balance.

4. Prepare a worksheet to determine the consolidated values to be reported on P's financial statements.