At the beginning of 2015, A Company received a government grant to purchase a building. The amount of the grant was P5,000,000 and was recorded as reduction of the cost of the building.

The building was purchased for P18,000,000 on the date the grant was received, with an estimated useful life of 16 years and an estimated residual value of P150,000.

On January 1, 2021, the entire amount of the grant became repayable by reason of noncompliance with conditions attached to the grant.

1. Determine the depreciation expense recorded in 2021 related to the building.

On January 1, 2020, A Company decided to sell one of its machineries with a cost of P3,400,000 and accumulated depreciation of P650,000. Depreciation was P280,000 per annum.

The company undertook all necessary actions to be able to classify the asset as held for sale. It is estimated that the machine can be sold for its fair value of P2,680,000, incurring P40,000 selling costs in the process.

On March 31, 2020, the machine was not yet sold, and there was an increase in fair value to P2,810,000 and selling costs of P40,000.

On June 30, 2020, A Company was able to sell the plant for P2,850,000 after incurring P30,000 in selling costs.

2. Determine gain (loss) to be recognized on the sale of machinery on June 30, 2020.