In the audit of the Books of Cagayan Corporation for the year 2020, the following items and information appeared in the Production Machine account of the client: Date 01/01 02/28 09/01 12/01 Particulars Balance- Machine 1,2,3 and 4 at 180,000 each Machine 5 Machine 1 Machine 6 Machine 7 Debit P 720,000 396,000 192,000 432,000 Credit P 6,000 The accumulated depreciation account contained no entries for the year 2020. The balance on January 1, 2020 per pur audit, was follows: Machine 1 Machine 2 Machine 3 Machine 4 P 168,750 78,750 67,500 45,000 Based on your further inquiry and verification, you noted the following: 2. 3. 4. Machine 5 was purchased for cash; it replaced Machine 1, which was sold on this date for 6,000. Machine 2 was destroyed by the thickness of engine oil used leading to explosion on December 1, 2020. Machine 7 was to replace Machine 2. Machine 3 was traded in for Machine 6 at an allowance of 24,000; the difference was paid in cash and charged to Production Machine account. Depreciation rate is recognized at 25% per annum.