Vontkins Inc

Multiple Choice

Vontkins Inc.owned all of Quasimota Co.The subsidiary had bonds payable outstanding on January 1, 2017, with a book value of $265,000.The parent acquired the bonds on that date for $288,000.Subsequently, Vontkins reported interest income of $25,000 in 2017 while Quasimota reported interest expense of $29,000.Consolidated financial statements were prepared for 2018.What adjustment would be required for the retained earnings balance as of January 1, 2018?

A) Reduction of $27,000.
B) Reduction of $4,000.
C) Reduction of $19,000.
D) Reduction of $30,000.
E) Reduction of $20,000.