On July 31, 2018, Snowday Corporation issued $100,000, 5%, 20-year bonds for $88,443 when the market interest rate was 6%. The bonds pay semi-annual interest on July 31 and January 31. Snowday uses the effective interest method to amortize its bond discount or premium, and it has a January 31 year-end. How much would interest expense from these bonds be recorded in Snowdays financial statements for the year ended January 31, 2019?

Select one:

a. $153

b. $2,500

c. $5,153

d. $2,653

Effective interest amortization method uses which of the following rates to determine interest expense?

Select one:

a. Bond rate

b. Market rate

c. Effective amortization rate

d. Coupon rate