On January 1, Holly Ester Inc. issued $1,000,000, 10-

year, 9% bonds for $938,554. The market rate of interest for these bonds is 10%. Interest is payable annually on December31.

Holly Ester uses the effective-interest method of amortizing bond discount.

At the end of the first year, Holly Ester should report unamortized bond discount of:

(a) $54,900.

(c) $51,610.

(b) $57,591.

(d) $51,000.