On January 1, Free Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Free uses the effective-interest method of amortizing bond discount. At the end of the first year, Free should report bonds payable of:

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Select one:

a.

$4,725,500

b.

$4,714,500

c.

$258,050

d.

$4,745,000