Merchant Company issued 10-year bonds on January 1. The 8% bonds have a face value of $109,000 and pay interest every January 1 and July 1. The bonds were sold for $131,466 based on the market interest rate of 6%. Merchant uses the effective interest rate method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (round to the nearest dollar) of

a.$4,360

b.$3,270

c.$3,944

d.$5,259