[The Following Information Applies to the Questions Displayed Below

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 1, Hanover Corporation issued bonds with a $70,500 face value, a stated rate of interest of 8%, and a 5-year term to maturity. The bonds were issued at 97. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year.


-How much interest expense will Hanover report on its income statement on December 31,Year 1?

A) $423
B) $2,115
C) $5,640
D) $6,063