Tokyo Company adopted the policy of leasing as the primary method of selling its only product, a large-sized helicopter. The company constructed such a helicopter for Mishima Company at a total cost of P85,000,000. The terms of the lease provided for annual advance payments of P25,000,000 to be paid over 10 years with the ownership transferring to the lessee at the end of the lease period. It is estimated that the helicopter will have a residual value of P16,000,000 at that date. The lease payments began January 1, 2018. Tokyo Company incurred initial direct cost of P5,000,000 in financing the lease agreement with Mishima. The cash sale price of the helicopter is P148,750,000. Financing the construction was at a 14% rate. The PV of an annuity due of 1 at 14% for 10 periods is 5.95, the PV of 1 at 14% for 10 periods is 0.27.

1. What is the gross profit on sale that should be recognized by Tokyo Company?

A. 42,750,000

B. 47,750,000

C. 58,750,000

D. 63,750,000

2. What is the unearned interest income on January 1, 2018?

A. 85,250,000

B. 96,250,000

C. 117,250,000

D. 101,250,000

3. What is the interest income for 2019?

A. 16,250,500

B. 17,325,000

C. 20,240,500

D. 20,825,000

4. What is the carrying value of the lease receivable on December 31, 2020?

A. 97,351,070

B. 107,325,500

C. 122,351,070

D. 132,325,500