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

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

Theta Company pays $5,000,000 for Zeta Inc. and records the acquisition as a merger. Theta Company determines that identifiable intangibles valued at $2,200,000, not previously reported on Zeta’s books, are also recognized as acquired assets.

Required: a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Theta’s journal entry to record the merger. c. Now assume Theta determines that Zeta Inc. has unreported contingent liabilities, reportable at the date of acquisition following GAAP, with a fair value of $120,000. Recalculate the gain on acquisition.