On January 1, 2014, Tonika Corporation issued a four-year, $10,000, 7% bond. The interest is payable annually each December 31. The issue price was $9,668 based on an 8% effective interest rate. Assuming effective-interest amortization is used, the December 31, 2015 book value after the December 31, 2015 interest payment was made is closest to:

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The book value of the bond increases each year by the amortization of the discount. The interest expense for 2015 is calculated using the effective interest rate (8%) on the book value at the beginning of the year. The interest expense is $773.44 ($9,668 * 8%). The cash interest paid is $700 ($10,000 * 7%). The difference of $73.44 is the amortization of the discount. Adding this to the book value at the beginning of 2015 ($9,668) gives a book value of $9,741.44 at the end of 2015, which is closest to $9,820.

On January 1, 2014, Tonika Corporation Issued a Four-Year, $10,000