On December 31, 2014, King Neptune Co., a lessor, sold an equipment that it had been leasing under a direct financing lease. On January 1, 2014, after the receipt of the P325,000 lease payment for the year, the following account balances were associated with the lease: Lease receivable 2,925,000 Unearned interest income 500,000 Net lease receivable 2,425,000 The interest rate implicit in the lease is 10%. On December 31, 2014, the company sold the leased equipment to the lessee for P1,625,000 cash.

1. What is the loss on sale of equipment that should be recognized on December 31, 2014? A. 800,000 B. 1,042,500 C. 1,125,000 D. 1,400,000

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