On October 1, Year 1, Howell Stores, Inc. issues twenty-year, first mortgage bonds with a face value of $1,000,000. The proceeds of the issue are $1,060,000. The bonds bear interest at the rate of 10 percent per year, payable semiannually at April 1 and October 1. Howell Stores Inc. closes its books annually at December 31. Round amounts to the nearest dollar.

Assume that Howell Stores, Inc. uses the effective-interest method. The effective-interest rate to be used is 9.3 percent, compounded semiannually. The amount of interest expense on mortgage bonds at Dec 31st of the first year is:

A.$50,000

B.$24,645

C.None of the other alternatives are correct

D.$25,000

E.$24,250