Bargain Purchase Upsilon Inc.'s net assets have fair values as described below:

	Fair Value
Current assets	$500,000
Land	$1,200,000
Buildings and equipment	$1,400,000
Loans payable	$(400,000)

Phi Company pays $4,200,000 for Upsilon Inc. and records the acquisition as a merger. Phi Company determines that identifiable intangibles valued at $1,800,000, not previously reported on Upsilon’s books, are also recognized as acquired assets.

Required: a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Phi’s journal entry to record the merger. c. Now assume Phi determines that Upsilon Inc. has unreported contingent liabilities, reportable at the date of acquisition following GAAP, with a fair value of $95,000. Recalculate the gain on acquisition.