On January 1, 2015 Rowena Company acquired a 10% interest in an investee for P3,000,000. The investment was accounted for under the cost method. During 2015, the investee reported net income of P4,000,000 and paid dividends of P1,000,000. On January 1, 2016, the entity acquired further a 15% interest in the investee for P8,500,000. On such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair value of the 10% existing interest was P3,500,000. The fair value of the net assets of the investee is equal to carrying amount except for an equipment whose fair value was P4,000,000 greater than carrying amount. The equipment had a remaining life of 5 years. The investee reported net income of P8,000,000 for 2016 and paid dividends of P5,000,000 on December 31, 2016.

1. What is the goodwill arising from the acquisition of January 1, 2016?

2. What total amount of income should be recognized by the investor in 2016?

3. What is the carrying amount of the investment in associate on December 31, 2016?