Kelsey Corporation purchased a $1,000 face value bond on January 15, 2016, for $1,000. The corporation has a December 31 year-end. The bond was issued on the same date, January 15, 2016. Interest is payable at 4% compounded semi-annually on uncashed coupons on each of June 30 and December 31 at the investor’s option. The bond matures in five years.

REQUIRED
If Kelsey Corporation does not exercise the option to receive interest, what amount of interest would the corporation include in its net income for tax purposes for the taxation years 2016 and 2017? Ignore the effects of the leap year.