B Company exchanged its old machinery, with a carrying amount of P1,500,000 and a fair value of P2,000,000, with an equipment from C Corporation. The fair value of the equipment received by B is P2,100,000. BASIC, aside from giving up its old machinery, is also required to pay P100,000 to cover for the difference in fair value.

1. Provided that the exchange has commercial substance, what is the initial cost of the equipment received by B?

2. Provided that the exchange has commercial substance, how much is the gain or loss on exchange to be recognized by B?

3. Provided that the exchange lacks commercial substance, how much is the gain or loss on exchange to be recognized by B?