At the beginning of current year, Killer Company entered into a 5-year lease for drilling equipment. The entity accounted for the acquisition as a finance lease for P 2,400,000, which included a P...

At the beginning of current year, Killer Company entered into a 5-year lease for drilling equipment. The entity accounted for the acquisition as a finance lease for P 2,400,000, which included a P 100,000 bargain purchase option. At the end of the lease, the entity is expected to exercise the bargain purchase option. The entity estimated that the equipment’s fair value will be P 200,000 at the end of the 8-year life and regularly used straight line depreciation on similar equipment. What amount should be recognized as depreciation expense on the leased asset for the current year? Show your solution.