On January 2, 2018, Sloan Company issued a 5-year, $12,000,000 note at LIBOR with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 6.8%

Sloan Company decides it prefers fixed-rate financing and wants to lock in a rate of 7%. As a result, Sloan enters into an interest rate swap to pay 7% fixed and receive LIBOR based on $12 million. The variable rate is reset to 7.4% on January 2, 2019.

Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2018.