Cramer Company Sold Five-Year, 8% Bonds on October 1, 2018

Cramer Company sold five-year, 8% bonds on October 1, 2018. The face amount of the bonds was $100,000, while the issue price was $102,000. Interest is payable on April 1 of each year. The fiscal year of Cramer Company ends on December 31. How much interest expense will Cramer Company report in its December 31, 2018, income statement (assume straight-line amortization) ?

A) $2,000.
B) $1,900.
C) $1,778.
D) $2,040.

Correct Answer:

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