$On$ January $3,2022,$ Persoff Corporation acquired all $of$ the outstanding voting stock $of$ Sea Cliff, Incorporated, $in$ exchange for $$7,467,000in$ cash. Persoff elected $to$ exercise control over Sea Cliff $as$ a wholly owned subsidiary with $an$ independent accounting system. Both companies have December $31$ fiscal year$-$ends. $At$ the acquisition date, Sea Cliff$s$ stockholders$$ equity was $$2,549,500$ including retained earnings $of$ $$1,749,500.$

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 Book Value Fair Value Remaining Useful Life

Patented technology $ $162,500$ $ $2,577,5007$ years

Computer software $ $73,500$ $ $2,353,50012$ 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:

Year Net Income Dividends

$2022$ $ $900,900$ $ $150,000$

$2023940,900150,000$

$2024975,900150,000$

December $31,2024,$ financial statements for each company follow. Parentheses indicate credit balances. Dividends declared were paid $in$ the same period.

Items Persoff Sea Cliff

Income Statement

Revenues $ $(2,810,000)$ $ $(2,295,000)$

Cost $of$ goods sold $1,394,100887,100$

Depreciation expense $297,500398,000$

Amortization expense $397,00034,000$

Equity earnings $in$ Sea Cliff $(440,900)0$

Net income $ $(1,162,300)$ $ $(975,900)$

Statement $of$ Retained Earnings

Retained earnings$\frac{1}{1}$ $ $(7,515,000)$ $ $(3,291,300)$

Net income $(above)(1,162,300)(975,900)$

Dividends declared $600,000150,000$

Retained earnings$\frac{12}{31}$ $ $(8,077,300)$ $ $(4,117,200)$

Balance Sheet

Current assets $ $530,500$ $ $397,500$

Investment $in$ Sea Cliff $8,229,7000$

Computer software $345,00058,500$

Patented technology $854,00098,000$

Goodwill $118,0000$

Equipment $1,866,5004,590,000$

Total assets $ $11,943,700$ $ $5,144,000$

Liabilities $ $(1,866,400)$ $ $(226,800)$

Common stock $(2,000,000)(800,000)$

Retained earnings$\frac{12}{31}(8,077,300)(4,117,200)$

Total liabilities and equity $ $(11,943,700)$ $ $(5,144,000)$

Required:

Determine the fair value $in$ excess $of$ book value for Persoff's acquisition date investment $in$ Sea Cliff.

Determine Persoff's Equity earnings $in$ Sea Cliff's balance for the year ended December $31,2024.$

Determine Persoff's December $31,2024,$ Investment $in$ Sea Cliff's balance.

Prepare a worksheet $to$ determine the consolidated values $tobe$ reported $on$ Persoff$s$ financial statements.