Powell Company Owns an 80% Interest in Sauter, Inc

Multiple Choice

Powell Company owns an 80% interest in Sauter, Inc. On January 1, 20X1, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $25,000. On December 31, 20X5, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization.
-Refer to Powell Company. Bond interest expense included as an adjustment in the 20X5 subsidiary income distribution schedule is ____.

A) $48,000
B) $45,500
C) $47,500
D) $0