Company A acquired 80% of Company B's outstanding shares on January 1, 2022, by paying cash. The consolidated statement of financial position showed the following balances at the date of acquisition.

Consolidated Balances	Amount
Total Assets	15,670,000
Total Liabilities	4,575,000
Total Shareholder’s Equity	?

 

The book value of the net assets of Company B is P4,500,000. The assets of Company B are fairly valued except for the following:

• Patent on the product that is deemed worthless, P50,000.
• Goodwill of P150,000.
• Unrecognized identifiable R&D of P75,000.

The fair value of the non-controlling interest is 705,000 and the book value of Company A’s equity balance is P9,500,000.

 

On December 31, 2022, the following information was provided by Company B:

• Net income of 400,000 was recognized.
• Patents remaining useful life is 4 years.
• Pre-existing goodwill presented above was impaired with a current value of 120,000.
• Dividends were declared amounting to P100,000.

Company A recognized net income amounting to P650,000 on December 31, 2022.

How much is the goodwill or gain on bargain purchase?

a. 890,000 goodwill

b. 890,000 on bargain purchase

c. 720,000 goodwill

d. 720,000 gain on bargain purchase