On January 1, 2020, a lessee leased an office space with 2 floors, for P1,000,00, payable every January 1, starting next year. The lease term was 3 years, while the useful life of the office space was 4 years. The lessee paid P100,000 as lease bonus. The lessor also reimbursed P30,000 to the lessee. The implicit interest rate is 8%.

On January 1, 2022, due to financial difficulties, the lessee and the lessor agreed to modify the lease as follows:

Only 1 floor will be rented.

The annual lease payments will be reduced to P400,000.

The lease term will be extended for 2 more years.

The incremental borrowing rate at this date is 10%.

How much is the interest expense for 2021?

How much is the gain / (loss) on partial termination as of date of modification, if any?