Problem 3-26 (LO 3-1, 3-3a) On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc. in exchange for $8,119,000 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 $2,571,500 including retained earnings of $1,771,500. 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 Book Value $ 172,500 79,500 Fair Value $ 2,727,500 2,839,500 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: 2016 2017 2018 Net Income $ 901,300 941,300 976,300 Dividends $ 150,000 150,000 150,000 December 31, 2018, financial statements for each company appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period. Persoff Sea Cliff $ (2,850,000) 1,413,700 307,500 409,000 (381,300) $ (1,101,100) $(2,315,000) 894,700 406,000 38,000 $ (976,300) $ (7,535,000) (1,101,100) 600,000 $ (8,036,100) $ (3,314,100) (976,300) 150,000 $(4,140,400) 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 $ 407,500 64,500 106,000 $ 548,500 8,702,900 365,000 878,000 126,000 1,880,500 $ 12,500,900 $ (2,464,800) (2,000,000) (8,036,100) $(12,500,900) 4,630,000 $ 5,208,000 $ (267,600) (800,000) (4,140,400) $(5,208,000) 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, 2018. c. Determine Persoff's December 31, 2018, Investment in Sea Cliff's balance d. Prepare a worksheet to determine the consolidated values to be reported on Persoff's financial statements. 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 Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required c Required D Determine Persoff's Equity earnings in Sea Cliff's balance for the year ended December 31, 2018. Equity earnings in Sea Cliff Required A Required C > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine Persoff's December 31, 2018, Investment in Sea Cliff's balance. Investment in Sea Cliff ...SHOW Yesex Consolidated Totals PERSOFF CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year December 31, 2018 Consolidation Entries Accounts Persoff Sea Cliff Debit Credit Income Statement Revenues $ (2,850,000) $ (2,315,000) Cost of goods sold 1,413,700 894,700 Depreciation expense 307,500 406,000 Amortization expense 409,000 38,000 Equity earnings in Sea Cliff (381,300) Net income $ (1,101,100) $ (976,300) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (7,535,000) (1,101,100) 600,000 $ (8,036,100) (3,314,100) (976,300) 150,000 $ (4,140,400) $ 407,500 Balance Sheet Current assets Investment in Sea Cliff Computer software Patented technology Goodwill Equipment Total assets $ 548,500 8,702,900 365,000 878,000 126,000 1,880,500 $ 12,500,900 64,500 106,000 4,630,000 5,208,000 $ Liabilities Common stock Retained earnings 12/31 Total liabilities and equity (2,464,800) (2,000,000) (8,036,100) $(12,500,900) (267,600) (800,000) (4,140,400) $ (5,208,000)