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Forces of supply and demand cause a bond to be priced to yield the market rate, calculated as the present value of all the cash flows required, where the discount rate is the market rate. Interest expense is calculated as the effective market rate of interest multiplied by the outstanding balance $($during the interest period$).$ A company is permitted to allocate a discount or a premium equally to each period over the term to maturity if doing so produces results that are not materially different from the interest method.

Knowledge Check $01$

On January $1,$ Year $1,$ Willette Company sold $$240,000$ of $6\%$ ten$-$year bonds. Interest is payable semiannually on June $30$ and December $31.$ The bonds were sold for $$180,181,$ priced to yield $10\%.$ Using the straight$-$line method, what is the amount of interest expense that Willette will report for the six months ended June $30,$ Year $1?$

Note: Round each calculation to the nearest whole dollar.