On January 1, 2021, Enigma Company sold an equipment costing P500,000 which had a carrying amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest bearing note due on January 1, 2024.

There was no established exchange price for the equipment, and the note had no ready market.

The prevailing rate of interest for a note of this type at January 1, 2021 was 12%. The present value of 1 at 12% for three periods is 0.7118.

Required:

Prepare journal entries for 2021, 2022, 2023 and 2024.

Can someone explain the solution as well? For me to further understand how it came up with the final answer. Thank you.