On January 1, 2003, Martinez Corp. issued $2,000,000 of 10% bonds which may be converted into total 10,000 shares of $5 par value ordinary shares. The market interest rate of is 12%. Interest is payable annually on December 31, and the bonds were issued at par. The maturity date is December 31, 2007. How much of Interest Expense should Martinez report on December 31, 2003 under U.S. GAAP and IFRS respectively?

U.S. GAAP IFRS

Multiple Choice

A) $200,000 $200,000

B) $185,582 $200,000

C) $200,000 $222,698

D) $222,698 $185,582