A company issued 5-year,7% bonds with a par value of $100,000.The market rate when the bonds were issued was 6.5%.The company received $102,105 cash for the bonds.Using the effective interest method,the amount of recorded interest expense for the first semiannual interest period is:

A) $3,500.00.
B) $7,000.00.
C) $3,318.41.
D) $6,573.90.
E) $1,750.00.

Using the effective interest method, the interest expense for the first semiannual interest period can be calculated as follows:
Step 1: Calculate the semiannual coupon payment
Coupon rate = 7%
Par value = $100,000
Coupon payment = Coupon rate x Par value / 2 = 7% x $100,000 / 2 = $3,500
Step 2: Calculate the semiannual interest expense
Carrying value = $102,105 (the amount the company received for the bonds)
Effective interest rate = 6.5% / 2 = 3.25% (since it is a semiannual period)
Semiannual interest expense = Carrying value x Effective interest rate = $102,105 x 3.25% = $3,318.41
Therefore, the recorded interest expense for the first semiannual interest period is $3,318.41.
Choice C is the correct answer.