On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104 resulting in a 4% premium. They had a 20 year term, a stated rate of interest of 7%, and an effective rate of interest of 6.633%. Assuming Residence uses the effective interest rate method, the amount of interest expense recognized on the December 31, Year 1 income statement is (round any necessary computations to the nearest whole dollar)

A. $3,499

B. $3,500

C. $3,449

D. $3,600