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On January 1 of Year 1, Congo Express Airways issued $2,700,000 of 6% bonds that pay interest semiannually on January 1 and July 1. The

On January 1 of Year 1, Congo Express Airways issued $2,700,000 of 6% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $2,450,000 and the market rate of interest for similar bonds is 7%. The bond premium or discount is being amortized at a rate of $8,333 every six months.

The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:

a. $145,334.

b. $162,000.

c. $89,333.

d. $178,666.

e. $189,000.

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