On September 1, 2020, Scott Ltd. issued $2,000,000, 5% bonds which mature on September 1, 2028. The bonds were issued when the market rate was 6%, and Scott received $1,875,804 in cash. Interest is paid annually on August 31. Assuming Scott has a December 31 year end, how much interest expense should Scott record on December 31, 2020?

Question 7 options:

$31,263

$33,333

$37,516

$40,000