On January 1, 2020, a lessee leased an office space with 2 floors, for P1,000,000 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%

QUESTION 1: How much is the interest expense for 2021?

QUESTION 2: How much is the gain or loss on partial termination as of date of modification, if any?

QUESTION 3: The depreciation to be recognized in 2022 is?

QUESTION 4: How much is the carrying value of the lease liability as of December 31, 2022?