Bargain Purchase Delta Ltd's net assets have fair values as described below:

	Fair Value
Current assets	$350,000
Land	$1,000,000
Buildings and equipment	$1,300,000
Loans payable	$(400,000)

Epsilon Company pays $3,800,000 for Delta Ltd and records the acquisition as a merger. Epsilon Company determines that identifiable intangibles valued at $1,600,000, not previously reported on Delta’s books, are also recognized as acquired assets.

Required: a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Epsilon’s journal entry to record the merger. c. Now assume Epsilon determines that Delta Ltd has unreported contingent liabilities, reportable at the date of acquisition following GAAP, with a fair value of $100,000. Recalculate the gain on acquisition.