Karen Owns City of Richmond Bonds with a Face Value

Multiple Choice

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1, 2012, for $11,000.The maturity date is December 31, 2021.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2012, and the adjusted basis for the bonds at the end of 2012, assuming straight-line amortization is appropriate?

A) $0 and $11,000.
B) $0 and $10,900.
C) $100 and $11,000.
D) $100 and $10,900.
E) None of the above.