To be able to raise capital, Danson Company issued five-year, $50,000, 7% bonds on January 2, 2020, with interest payable annually each December 31. The issue price was $54,330 based on an 5% market rate.

Rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2020 interest expense?

Multiple Choice

• Interest expense	3,500
  Cash		3,500

• Interest expense	2,717
  Bond premium	783
  Cash		3,500

• Interest expense	1,359
  Bond discount	392
  Cash		1,750

• Interest expense	3500
  Bond premium	303
  Cash		3,803