On June 30, Year 1, Marshall Company borrowed $13,000 from its bank for business expansion. The bank charges 12% interest requiring quarterly payments of equal size over a four-year period. The first quarterly payment is due on September 30, Year 1. Additionally, Marshall is required to make a balloon payment of $6,000 to the bank at the time of the sixteenth and final quarterly payment. The last quarterly payment is due on June 30, Year 5. Assume all payments are made as scheduled. Marshalls fiscal years [accounting years] end on Dec. 31 and the firm uses the effective interest method for notes payable as covered in classes.

Show the Interest Expense recognized at the time of the second quarterly payment on December 31, Year 1. This interest would be for the three months ended on December 31, Year 1.