On January 2, 20X1, Ziegler Company issues a four-year note in exchange for a license agreement requiring four annual payments of $27,956. The market value of the four-year agreement is $100,000. The first payment is due on the day the agreement is signed. The effective interest rate is 8%. The first payment includes interest expense of:

Multiple Choice

• $11,824.

• 0

• $8,000.

• $27,956.