Davidson,Inc

Multiple Choice

Davidson,Inc.owns 70 percent of the outstanding voting stock of Ernest Company.On January 2,2007,Davidson sold 8 percent bonds payable with a $5,000,000 face value maturing January 2,2027 at a premium of $400,000.On January 1,2009,Ernest acquired 30 percent of these same bonds at 97.6.Both companies use the straight-line method of amortization.What adjustment should be made to Davidson's 2010 beginning Retained Earnings as a result of this bond acquisition?

A) $114,000.
B) $122,000.
C) $136,000.
D) $144,000.
E) $152,000.