Paper Corporation Holds 80 Percent of the Voting Shares of Scissor

Multiple Choice

Paper Corporation holds 80 percent of the voting shares of Scissor Company.On January 1,20X8,Scissor purchased $100,000 par value 12 percent first mortgage bonds of Paper from Cruse for $115,000.Paper originally issued the bonds to Cruse on January 1,20X6,for $110,000.The bonds have an 8-year maturity from the date of issue.Scissor's reported net income of $65,000 for 20X8,and Paper reported income (excluding income from ownership of Scissor's stock) of $90,000.
-Based on the information given above,what amount of interest expense does Paper record annually?

A) $10,750
B) $9,500
C) $2,500
D) $12,000