On January 1, 2018, Morton Sales Co. issued zero-coupon bonds with a face value of $5.4 million for cash. The bonds mature in 6 years and were issued at a price of $3,219,858. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required: What amount of interest expense on these bonds would Morton Sales Co. report in its 2018 income statement?

Is it.....

5,400,000-3,219,858 = 2,180,142/6 = 363,357

or

3,219,858/5,400,000 = .59627 which is 9% which is 3,219,858*.09 = 289,787 ????