On January 1, 2017, ENTITY A issued P7,000,000 12% 5-year convertible bonds at 110. Each 1,000 bond is convertible into 3 shares of P10 par value ordinary shares. Similar instruments without the conversion option are being traded at prices that yield 14%. On December 31, 2018, holders of P3,500,000 face value bonds exercised their conversion privilege when each ordinary share sells for P130. On January 1, 2020, P1,500,000 of the bonds issued were retired by ENTITY A at 103. Without the conversion privilege, these bonds would have been sold on January 1, 2020 at 101.

1) How much is the interest expense for the year ended December 31, 2019?

2) How much is to be credited to discount on bonds payable on January 1,2020?

3) How much is the carrying value of the bonds on December 31, 2018 after exercise of the conversion option?