On 7/1/Y1 Martin issued bonds with a face value of $100,000 and 12% interest payable semiannually on Dec 31 and June 30. The bonds mature on 6/30/Y5. The market rate of interest at the time of issuance was 14%, so the bonds were issued at a discount of $7,054. Martin uses the effective interest method.

The amount of the discount that should be amortized by Navarre in Year 1 is

• A.

  $702.35

• B.

  $506.22

• C.

  $493.75

• D.

  $423.21