On January 1, 2018, Global Sales issued $25,000 in bonds for $29,800. These are eight-year bonds with a stated rate of 15% and pay semiannual interest. Global Sales uses the straight-line method to amortize the bond premium. On June 30, 2018, when Global makes the first payment to bondholders, what is the amount that will be reported as Interest Expense? (Round your intermediate answers to the nearest dollar.)
A) $1575
B) $1875
C) $3225
D) $1225
A) $1575
Explanation: Cash Interest Payment ($25,000 × 15% × 6/12) $1875
Less: Amortization of Premium [(($29,800 - $25,000) / 8) × (6/12)] 300
Total Interest Expense $1575
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