On July 1, 2020, Manuel Corporation purchased machinery worth P 8,000,000. Terms: P 500,000 down payment, the balance on three equal annual payments every July 1 of each year. The cash price of the machinery is P 6,000,000. A promissory note is issued for the installment balance.

1. What is the carrying amount of machinery at December 31, 2020?

A. 8,500,000

B. 7,500,000

C. 6,500,000