Silly Corporation issued $6,000,000 of 8% bonds on October1, 2017 due on October1, 2022. The interest is to be paid twice a year on April 1 and October1. The bonds were sold to yield 10% effective annual interest. Silly Corporation closes its books annually on December 31.

Prepare the adjusting entry for December 31, 2018. Use the effective-interest method.

Compute the interest expense to be reported in the income statement for the year ended December31, 2018