Neptune Company had debt investments in its accounting records. As a new audit staff, you were assigned to audit these investments to verify the accuracy of the balances as well as the existence of these investments. Upon inquiry from the clients personnel and inspection of the relevant documents, you were able to gather the following information:

• On January 1, 2018, the entity purchased debt securities of ABC Co. for cash of P1,167,841. The securities have a face value of P800,000, and they mature in 15 years. The securities carry fixed interest of 12%, that is receivable semiannually, on June 30 and December 31. The prevailing market interest rate on these debt securities is 7% compounded semiannually. This was designated as part of its financial assets at amortized cost.

• Purchased P6,000,000 of X Company 7% bonds, paying 102.5 plus accrued interest of P70,000. In addition, the company paid brokerage fee of 15,000. Rain or Shine classified these bonds as financial assets at fair value through profit or loss. During the year, semiannual interest on the X Company bonds on June 30 and December 31 were received. During the year, the entity also sold P600,000 of X Company 7% bonds at 102, plus accrued interest of P3,500. This investment was initially at face value and the related brokerage fee was expensed. At year end, the bonds were selling at 103.

  Required: Prepare an audit working paper for 2019 showing computations for

• (a) the interest income

• (b) net gain (loss) recognized in P&L

• (c) carrying amount of debt investments