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, 2018, for $11,000. The maturity date is December 31, 2027. The annual interest rate is 4%. What is the amount of taxable interest income that Karen should report for 2018, and the adjusted basis for the bonds at the end of 2018, 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