On January 1, 2020, Akin Company sold equipment with a carrying amount of P4,800,000 in exchange for a P6,000,000 noninterest-bearing note due January 1, 2023. There was no established exchange price...

On January 1, 2020, Akin Company sold equipment with a carrying amount of P4,800,000 in exchange for a P6,000,000 noninterest-bearing note due January 1, 2023. There was no established exchange price for the equipment.

The prevailing rate of interest for a similar note was 10%.

The present value of 1 at 10% for three periods is 0.75.

1. What amount should be reported as interest income for 2020?

 a. 600,000

 b. 500,000

 c. 450,000

 d. 400,000

2. What amount should be reported as gain or loss on sale of equipment for 2020?

 a. 1,200,000 gain

 b. 2,700,000 gain

 c. 300,000 gain

 d. 300,000 loss