1. On December 31, 2021, Maria Corp. sold for P100,000 an old equipment having an original cost of P80,000 and a carrying amount of P50,000. The terms of the sale were as follows:

P40,000 down payment; P30,000 payable on December 31 of each year of the next two years.

The agreement of sale made no mention of interest; however, 12% would be a fair rate for this type of transaction. (Hint: PV of OA of 1 at 12% for 2 periods is 1.6901)

a.) How much should be recognized as gain on sale of equipment?

b.) How much should be recognized as interest income in 2022 related to above transaction?