On January 1, 2017, Luyang company issued 3-year bonds payable with face value of P5,000,000 at 98. Additionally, Luyang company paid bond issue cost of P140,000. The nominal rate is 10% and the effective rate after considering the bond issue cost is 12%. The interest is payable annually on December 31. Luyang Company uses the effective interest method in amortizing discount and issue cost. What is the carrying amount of the bonds payable on December 31, 2018?

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