Cramer Company sold five-year, 8% bonds on October 1, 2016. The face amount of the bonds was $100,000, while the issue price was $102,000. Interest is payable on April 1 of each year. The fiscal year of Cramer Company ends on December 31. How much interest expense will Cramer Company report in its December 31, 2016, income statement ( assume straight- line amoritization)?

1.) $2,000

2.) $1,900

3.) $1,778

4.) $2,040

Please show work