On January 1, 2014, Tonika Corporation issued a four-year, $10,600, 7% bond. The interest is payable annually each December 31. The issue price was $9,968 based on an 8% effective interest rate. Assuming the effective-interest amortization is used, and rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2014 interest expense? (option 1,2,3 , or 4)

Interest expense	797
Discount on bonds payable		55
Cash		742

Interest expense	742
Cash		742

Interest expense	910
Discount on bonds payable		168
Cash		742

Interest expense	697
Discount on bonds payable	45
Cash		742