At the beginning of the year, Lessor Company entered into a lease agreement for a machine which was carried on the books of the lessor at P2 million.

Total payment under the lease (with lease term of 10 years) total P3,550,800, of which P2,400,000 represents cost to the lessee. Payments of P355,080 are due each January 1 of each year. Implicit interest rate is 10%.

The lessee expects the machine to have a 10-year life, no residual value and be depreciated on a straight-line basis. The lease qualifies as a sales-type lease.

Prepare journal entries to record the transactions during the current year in the books of the lessor.