On January 1, Year 1, Spectrum Fabricators Inc. issues $20 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6 percent, pay interest annually, and come due December 31, Year 5. The bonds are convertible at any time after issuance at the rate of 10 shares of common stock for each $1,000 of the face value  of the convertible bonds. Issuance costs total $100,000. The current market interest rate for nonconvertible bonds is 8 percent.

Required:
Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar). Determine the amount of expense related to the convertible bonds that the company should recognize each year (round to the nearest dollar).