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

	Fair Value
Current assets	$450,000
Land	$800,000
Buildings and equipment	$1,600,000
Loans payable	$(400,000)

Iota Company pays $3,500,000 for Epsilon Ltd and records the acquisition as a merger. Iota Company determines that identifiable intangibles valued at $1,900,000, not previously reported on Epsilon’s books, are also recognized as acquired assets.

Required: a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Iota’s journal entry to record the merger. c. Now assume Iota determines that Epsilon Ltd has unreported contingent liabilities, reportable at the date of acquisition following GAAP, with a fair value of $75,000. Recalculate the gain on acquisition.