On January 1, 2021, a tract of land that originally cost P800,000 was sold by Gab Corp. The company received a P1,200,000 note as payment. It bears interest rate of 4% and is payable in 3 annual installments of P400,000 plus interest on the outstanding balance. The prevailing rate of interest for a note of this type is 10%. The present value table shows the following present value factors of 1 at 10%:

1. The gain to be recognized on the sale of the land is?

a. P0

b. P194,740

c. P276,847

d. P400,000

2. The interest income to be reported for 2021 should be?

a. P59,685

b. P48,000

c. P120,000

d. 107,685

Present value factor of 1 for 3 periods Present value factor of 1 for 2 periods Present value factor of 1 for 1 period Present value of an ordinary annuity of 1 for 3 periods 0.75132 0.82645 0.90909 2.48685